Market commenters have suggested that billions of dollars in municipal bonds may be subject to par redemptions if the much-discussed “28% cap” on the value of certain federal income tax deductions or exclusions is enacted and if the capped items include municipal bond interest.

This is a follow up to our recent blog post discussing then pending Michigan legislation known as the “Local Financial Stability and Choice Act” or Public Act 436 (the “Financial Stability Act”), which will replace Public Act 72 and overhaul Michigan’s emergency manager law.

Detroit’s increasingly distressed financial condition has created a dynamic and rapidly evolving situation where the potential of a Chapter 9 filing appears to be the subject of renewed discussion and legislative attention. 

Since August 2, 2012, investment banking firms retained to act as underwriters on municipal finance transactions have been required to provide written disclosure to issuers concerning the relationship between issuers and underwriters.

Please find today’s special revenue decision in the Jefferson County bankruptcy case.

The IRS is planning on sending out letters (“Letters”) over the next few months to several hundred issuers who have experienced covenant or payment defaults from 2007 to the present.

While the Investor Bulletin is fairly basic and addressed primarily to investors generally, the list of some of the risks of investing in municipal bonds included in the Bulletin may be helpful to issuers and underwriters when preparing or reviewing disclosure documents. 

On March 19, the SEC’s Office of Compliance Inspections and Examinations released a National Examination Risk Alert http://www.sec.gov/about/offices/ocie/riskalert-muniduediligence.pdf reporting on its examinations of broker-dealers for compliance with municipal bond underwriter due diligence obligations under the SEC’s prior interpretive releases and under SEC Rule 15c2-12.

The MSRB has put out for comment a proposed interpretive notice http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2012/2012-04.aspx designed to eliminate or reduce instances in which underwriters of new bonds issued under a parity indenture or bond resolution consent to amendments to such instrument on the issuance date of the new bonds.

The Massachusetts Attorney General recently promulgated regulations authorizing remote participation in meetings subject to the Open Meeting Law under certain prescribed circumstances.