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Press Release

Settlement with the Securities and Exchange Commission

Release Date: August 25, 2016

Contact Information:
Stephen G. Riley, ICMA-CM , Town Manager, 843-341-4700, Fax: 843-842-7728
Susan Simmons , Director of Finance, 843-341-4645


In May 2016, Hilton Head Island Town Council approved an offer of settlement with the Securities and Exchange Commission (SEC) stemming from the SEC’s Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program announced by the SEC in March 2014. Yesterday, the SEC issued its order accepting Hilton Head Island’s settlement offer and ordering the Town to not commit continuing disclosure violations in the future and to undertake certain corrective or remedial measures.  In settling this action, the Town neither admitted nor denied the SEC’s findings, and the Town is not subject to any civil or criminal penalty or fine as a result of its participation under the MCDC initiative or arising from the violations which are the subject of the SEC’s order. 

Under the MCDC initiative, municipal bond underwriters and bond issuers could voluntarily report to the SEC past instances in which inaccurate statements or omissions were made in bond offering documents (generally, between 2009 through 2014) relating to prior compliance by issuers with their continuing disclosure obligations under federal securities laws.   Taking advantage of MCDC, it was reported that the offering documents relating to bonds issued by the Town in 2011 and 2013 included statements that the Town was in compliance with its prior continuing disclosure requirements, when in fact the Town had filed its audited financial statements for fiscal years 2009 and 2010 approximately 288 and 43 days late, respectively, but did not specifically disclose those late filings in those offering documents. 

The MCDC initiative also provides that issuers participating in the MCDC initiative would receive favorable settlement terms, including undertakings to establish appropriate policies, procedures and training regarding continuing disclosure obligations, to comply with existing continuing disclosure undertakings, to update past delinquent filings (if any), to disclose the settlement in future offering documents and to cooperate with any subsequent investigations by the enforcement division of the SEC.  The settlement terms agreed to by the Town and described in the SEC’s order are consistent with those originally announced by the SEC in March 2014.

At the same time the SEC issued its order relating to the Town, the SEC announced similar actions against 71 other state and local government issuers and non-profit hospitals, including representation from almost every state in the United States.  This announcement follows three “rounds” of similar actions against 72 municipal bond underwriters (representing 96% of the market share for municipal underwritings) in 2015 and 2016.  It is unknown how many additional state and local government issuers participated in MCDC or how many additional actions (if any) will be announced by the SEC against state and local government issuers. 

The Town has been and remains fully committed to cooperating with the SEC’s efforts to ensure continuing disclosure in an appropriate and timely manner in connection with publicly traded bond issues.

The level of attention given by the bond market and the investing community to continuing disclosure is much more pronounced today than it was only a few years ago, and in today’s climate, both underwriters and issuers of publicly traded bonds must work hard to ensure timely compliance with all continuing disclosure obligations and accurate reporting of such compliance. The Town has taken steps necessary to ensure that it is in material compliance with its continuing disclosure obligations.

For more information on the Town’s continuing disclosure filings, please refer to the Electronic Municipal Market Access (EMMA) website at http://emma.msrb.org.