Sometimes, the Securities and Exchange Commission gives more guidance on compliance with its regulations by saying what it’s not concerned with.

SEC “no-action letters” sent to answer public company queries about whether the agency would view a particular product, service, or action as a violation of its rules can be crucial to interpreting rulemaking and steering clear of enforcement actions. While no-action letters involving shareholder issues dominate the number of those issued, other issues they address can have market-changing effects.

Investment banks that underwrite municipal securities have a greater understanding of how to tap into new technology when reaching out to investors thanks to a no-action letter issued in January to NetRoadshow.

Historically, the SEC has had a difficult time exerting control over the municipal securities marketplace, explained Ballard Spahr partner Bradley D. Patterson. It took the bankruptcy of Orange County, California, in 1994 to serve as a catalyst for change. “The SEC adopted a rule that requires ongoing disclosure, something the corporate world has been familiar with for decades.”

“It is very difficult for the SEC to regulate municipal entities, because it can’t enforce any kind of registration requirements on the municipal market,” Mr. Patterson added. “So, what they do is regulate the underwriters and indirectly regulate the governmental entities that way.”

Related Practice

Municipal Securities Regulation and Enforcement