The official statement, prepared by or on behalf of a municipal issuer in connection
with a new issue of municipal securities, 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. There are no strict requirements regarding the contents
of an official statement.
In general, the terms of the bonds described in an official statement will include
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
- 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.
Unless the terms of the bonds have been modified after the bonds were issued, the
official statement generally will provide the most detailed description of the terms
and features of the bonds throughout the life of the bonds.
Financial and/or operating data about the issuer of the securities or any other
parties who are responsible for repayment of the bonds is generally provided in
the official statement, together with descriptions of any covenants of the issuer
or other parties intended to protect the investor's financial interests. If the
bonds are issued for the purpose 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 the project is likely to generate sufficient revenues to make such payments.
Financial and operating data contained in the official statement can become stale
very quickly, no longer serving as reliable indicators of the then-current financial
health or operating experience of the issuer with respect to most secondary market
trading of the bonds. However, the financial and operating data provided in the
official statement does serve as a basis for comparison for annual financial information
provided by issuers and obligated persons under their continuing disclosure undertakings
pursuant to Rule 15c2-12 of the Securities and Exchange Commission.
The official statement also typically includes summaries of the material terms of
the relevant legal documents relating to the bonds, a copy of the legal opinion
of bond counsel on the legality of the issue and the tax treatment of the bonds
for federal income tax purposes, and (for insured bonds), a copy of the bond insurance
Underwriters are required to submit to the MSRB copies of the official statement
for virtually all new issues of municipal securities, which are made available on
EMMA. Underwriters are also 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 intended for use in connection with the initial distribution
of the securities through the underwriters. Official statements generally are not
intended to provide complete disclosure for bonds trading in the secondary market,
although they continue to be valuable as the most comprehensive source for information
on the specific terms of bonds.
For more information about official statements, see our frequently asked questions about official statements.