Frequently Asked Questions
Find answers below to some of the basic questions about how EMMA works, what are
the key features of municipal securities, how you should read an official statement,
what is an advance refunding, and how to understand the price and other terms of
a bond trade.
About Official Statements
- What is an official statement?
The official statement is a document prepared by or on behalf of a municipal issuer
in connection with a new issue of municipal securities. It describes the essential
terms of the bonds, including whether and on what terms the bonds can be redeemed
prior to maturity, the sources pledged to repay the bonds, the issuer's covenants
for the benefit of investors, and much more. In some respects, the official statement
is analogous to the prospectus for a corporate equity or debt offering.
- What information does an official statement
There are no strict requirements regarding the contents of an official statement,
unlike for a prospectus in the corporate securities market. The Securities and Exchange
Commission requires, for most offerings of municipal securities, that an underwriter
receive and review an official statement that contains information concerning the
terms of the proposed issue; financial information or operating data about the issuer
or other relevant parties; and a description of the undertaking to provide continuing
disclosures in connection with the securities.
In general, an official statement will provide a description of the terms of the
bonds, including such features as, among many others: the interest rate or, if the
interest rate is variable, the manner in which such rate is determined; the timing
and manner of payment of the interest on and the principal of the bonds; the minimum
denomination in which the bonds may be sold; whether the bonds can be redeemed by
the issuer prior to maturity and, if so, on what terms; whether the investor has
the right to require the issuer to repurchase the bonds at their face value; the
sources from which the issuer has promised to make payment on the bonds (e.g., from
its general taxing power, from a specific tax or revenue source, etc.); whether
any bond insurance, letter of credit or other guarantees have been provided for
repayment; and the consequences of a payment or non-payment default by the issuer.
In addition, financial and/or operating data regarding the issuer of the securities
or any other parties who are principally responsible for repayment of the bonds
is generally provided, together with descriptions of any covenants undertaken by
the issuer or such other party intended to protect the investor's financial interests.
If the bonds are issued for the purposes of funding a specific revenue-generating
project from which repayment of the bonds is to be made, the official statement
generally will provide additional financial, operating or other information (e.g.,
feasibility studies, engineering reports, etc.) intended to assist an investor in
determining whether such project is likely to generate sufficient revenues to make
such payments. The official statement also typically includes summaries of the material
terms of the principal legal documents binding the issuer with respect to the bonds
as well as a copy of the legal opinion of bond counsel relating to the legality
of the issue and tax treatment of the bonds for federal income tax purposes.
- Who is responsible for the information
in the official statement?
The issuer of the securities is ultimately responsible for the contents of the official
statement, although the issuer is often assisted by the underwriter, financial advisor
and legal counsel in the preparation of the official statement. The underwriter
is responsible for reviewing the official statement in connection with a new issue.
- Will the information in the official
statement be kept up-to-date?
Underwriters are required to submit to the MSRB copies of any amendments to the
official statement up until the 25th day after the settlement of the underwriting.
However, there is no explicit obligation on the part of the issuer to update the
official statement. Official statements for bond offerings generally speak only
as of their date and are not generally intended to serve as the disclosure document
for the bonds with respect to trading in the secondary market.
- Is there any information in the official
statement that is useful after the initial issuance of the bonds?
Financial and operating data contained in the official statement can become stale
very quickly and therefore no longer serve as reliable indicators of the then-current
financial health or operating experience of the issuer with respect to most secondary
market trading of bonds. On the other hand, unless the terms of the bonds have been
modified after the initial issuance of the bonds, the official statement generally
will provide the most detailed description of the terms and features of the bonds
throughout the life of the bonds.
- Where can I find updates on information
provided in the official statement?
For most municipal securities offerings, issuers undertake to provide continuing
disclosure of certain categories of information to the various nationally recognized
municipal securities information repositories ("NRMSIRs"). A listing of the current
NRMSIRs, as well as of certain state information depositories, from which such continuing
disclosure information is available is provided by the SEC at
- Why are official statements for some
issues not available on EMMA?
The requirement for underwriters to provide copies of official statements to the
MSRB only took effect for offerings occurring in 1990 or later. Thus, if an official
statement for a new issue was prepared prior to 1990, such official statement will
not be available from EMMA. Also, some offerings occurring in 1990 or later are
exempt from the filing requirement under MSRB rules. In general, a broker-dealer
or bank cannot underwrite a new issue of municipal securities unless it receives
an official statement from the issuer under the rules of the Securities and Exchange
Commission. This requirement does not apply in four cases:
- where the size of the new issue is $1 million or less;
- where bonds can be sold to investors in units of no smaller than $100,000 ("$100,000
minimum denomination") and are sold to no more than 35 "sophisticated" investors;
- where bonds are sold in $100,000 minimum denomination and mature in nine months
or less from initial issuance; and
- where bonds are sold in $100,000 minimum denomination and the bond owners can
require the issuer to purchase back the bonds at face value every nine months or
The descriptions included in the FAQs above are generalizations and do not necessarily
accurately represent the terms of any specific security. You must read the disclosure
materials and other relevant documents to fully understand your security.