Municipal Securities Disclosure Act of 2016

Summary: Municipal Securities Disclosure Act of 2016 This bill amends the Securities Act of 1933 to require registration with the Securities and Exchange Commission (SEC) of certain industrial development bonds that finance private projects through municipal securities. (Currently, the Securities Act exempts these private activity municipal bonds from SEC registration.)  The bill amends the Securities Exchange Act of 1934 to require state and local government issuers of municipal securities, or obligated persons or borrowers with respect to these securities, to prepare annual periodic reports and disseminate financial disclosures that the SEC determines appropriate in the public interest and for the protection of investors. (Currently, SEC antifraud rules do not regulate municipal securities issuers directly but the rules prohibit securities dealers from underwriting the buying or selling of municipal securities unless they obtain the state or local government issuer's agreement to provide ongoing disclosures to the Municipal Securities Rulemaking Board. The bill makes state or local government issuers directly responsible for providing the municipal securities disclosures by placing them under the SEC's jurisdiction.) The SEC may prescribe the accounting methods to be followed in the preparation of the financial statements or require the use of accounting methods established by a standard-setting body. An issuer or borrower of outstanding municipal securities exceeding $10 million must adopt internal controls that identify the officials responsible for preparing the required disclosures and provide checks and balances for adequate supervision. The SEC may allow these requirements to be satisfied through a statewide system of disclosure controls and disclosure education.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Municipal Securities Disclosure Act 
of 2016''.

SEC. 2. CERTAIN PRIVATE ACTIVITY BONDS SUBJECT TO REGISTRATION.

    Section 3(a)(2) of the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) 
is amended by striking ``or any security which is an industrial 
development bond'' and all that follows through ``section 103(c) does 
not apply to such security;''.

SEC. 3. MUNICIPAL SECURITIES DISCLOSURE.

    (a) In General.--Section 15B of the Securities Exchange Act of 1934 
(15 U.S.C. 78o-4) is amended--
            (1) in subsection (e)(8), by inserting after ``municipal 
        corporate instrumentality of a State'' the following: ``or of a 
        political subdivision of a State''; and
            (2) by adding at the end the following:
    ``(f) Municipal Securities Disclosure.--
            ``(1) Periodic reports and reports of certain enumerated 
        events.--
                    ``(A) In general.--Any issuer of, or obligated 
                person with respect to, municipal securities which has 
                outstanding during any portion of a fiscal year an 
                aggregate principal amount of municipal securities 
                exceeding such sums as determined by the Commission 
                shall prepare annual periodic reports and, in a timely 
                manner, reports of certain enumerated events, as 
                defined by rule or regulation of the Commission, in 
                such form and in such time periods as the Commission 
                may prescribe as being necessary or appropriate in the 
                public interest or for the protection of investors.
                    ``(B) Deadline.--The Commission shall determine the 
                deadline for when a periodic report described under 
                subparagraph (A) shall be prepared.
                    ``(C) Authority to scale requirements.--In issuing 
                rules to carry out subparagraphs (A) and (B), the 
                Commission may set different requirements for different 
                classes of issuers or other obligated persons, 
                including for issuers or other obligated persons of 
                different sizes, as appropriate.
            ``(2) Official statements for primary offerings.--
                    ``(A) In general.--It shall be unlawful for any 
                issuer of, or obligated person with respect to, 
                municipal securities that offers or sells an issue of 
                municipal securities in a public offering, the 
                aggregate principal amount of which exceeds an amount 
                to be determined by the Commission, to make use of the 
                mails or any means or instrumentality of interstate 
                commerce to effect any transaction in, or to induce or 
                attempt to induce the purchase or sale of, any 
                municipal security unless such issuer or other 
                obligated person, prior to the offer or sale, prepares 
                and disseminates an official statement in accordance 
                with such rules and regulations as the Commission may 
                prescribe as being necessary or appropriate in the 
                public interest or for the protection of investors.
                    ``(B) Contents.--The official statement described 
                in subparagraph (A) shall contain such information as 
                the Commission may, in its discretion, by rule or 
                regulation prescribe, including--
                            ``(i) an identification and description of 
                        the issuer of, or any other obligated person 
                        with respect to, the securities being offered;
                            ``(ii) a description of any legal 
                        limitation on the incurrence of indebtedness by 
                        the issuer, other obligated person, or the 
                        taxing authority of the issuer;
                            ``(iii) a description of the issuer's or 
                        other obligated person's debt structure, 
                        including information with respect to amounts 
                        of authorized and outstanding debt, estimated 
                        amount of short-term debt, character of 
                        amortization provisions of debt, sinking fund 
                        requirements, security for debt, nature and 
                        extent of guaranteed debt, and debt service 
                        requirements;
                            ``(iv) a description of the nature and 
                        extent of other material contingent liabilities 
                        or commitments of the issuer or other obligated 
                        person that could affect timely repayment of 
                        the subject debt, including any loans or 
                        alternative financings;
                            ``(v) if any payment of principal or 
                        interest on any security of the issuer or any 
                        predecessor thereof has been defaulted on, or 
                        has been postponed or delayed, during the 10 
                        years preceding the date of the official 
                        statement, a description of the date, amounts, 
                        and circumstances of such default, 
                        postponement, or delay and of the terms of any 
                        succeeding arrangements thereof;
                            ``(vi) if the securities are supported by 
                        taxes (including special assessments or 
                        payments in lieu of taxes)--
                                    ``(I) a description of the issuer's 
                                or other obligated person's tax 
                                authority and structure relating to the 
                                specific tax or taxes that serve as 
                                security for the debt over the 5 years 
                                preceding the date of the official 
                                statement, including the nature of 
                                taxes levied, tax rates, real and 
                                personal property valuation and 
                                assessment procedures, amounts of 
                                property valuations and assessments, 
                                amounts of tax levies, amounts of tax 
                                collections, and delinquent tax 
                                procedures and experience;
                                    ``(II) if the applicable taxes have 
                                not been levied as of the date of the 
                                official statement, an estimate of the 
                                future tax revenues during the term of 
                                the securities, including the basis for 
                                such estimate; and
                                    ``(III) a description of the 
                                issuer's or other obligated person's 
                                major taxpayers relating to the 
                                specific tax or taxes that serve as 
                                security for the debt;
                            ``(vii) if material to the type of debt 
                        being offered, the financial statements of the 
                        issuer or other obligated person--
                                    ``(I) in such detail and form, and 
                                for such periods beginning not earlier 
                                than the 5th fiscal year of the issuer 
                                or other obligated person ending before 
                                the date of the official statement, as 
                                the Commission may prescribe; and
                                    ``(II) for any fiscal year 
                                beginning on or after December 31, 
                                2015, that are audited and reported on 
                                by an independent public, or certified 
                                accountant or examiner from an 
                                independent State agency authorized by 
                                law to perform such functions, in such 
                                manner as the Commission may prescribe;
                            ``(viii) a description of the offering, 
                        including amount to be offered, price, plan of 
                        distribution, and underwriting arrangements and 
                        compensation;
                            ``(ix) a description of the securities to 
                        be offered, including whether the securities 
                        are secured by collateral or property, or other 
                        credit enhancements, events of default, payment 
                        of principal and interest, sinking fund, 
                        redemption, debt reserve funds, priority, and 
                        rights of security holders to bring suit 
                        against the issuer or other obligated person;
                            ``(x) a description of any project or 
                        enterprise of the issuer or other obligated 
                        person to be financed from the proceeds of the 
                        securities being offered, a description of the 
                        competitive environment for such project or 
                        enterprise, including any major changes in such 
                        competitive environment in the last 10 years, 
                        any engineering or financial feasibility 
                        reports or studies on the construction and 
                        operation of the project or enterprise, and a 
                        description of any additional financing 
                        required to complete the project or enterprise, 
                        including whether and when such additional 
                        financing has been, or will be, procured;
                            ``(xi) a description of the intended use of 
                        the proceeds of the offering;
                            ``(xii) a statement of counsel's opinion as 
                        to the legality, validity, and enforceability 
                        of the issuance of the securities to be 
                        offered;
                            ``(xiii) a description of any material 
                        conflicts of interest of the issuer or other 
                        obligated person, and any other party involved 
                        in the offering; and
                            ``(xiv) such other similar and specific 
                        information as the Commission may by rule or 
                        regulation require as necessary or appropriate 
                        in the public interest or for the protection of 
                        investors.
                    ``(C) Preliminary form of certain information.--In 
                the case of an official statement prepared for an issue 
                of municipal securities before any sale of such issue, 
                the information specified in clauses (viii) and (ix) of 
                subparagraph (B) may be set forth in preliminary form.
            ``(3) Form of information and accounting methods.--The 
        Commission may--
                    ``(A) prescribe, for reports and official 
                statements prepared pursuant to this subsection, the 
                form in which the required information, including 
                financial statements, shall be set forth, and the 
                accounting methods to be followed in the preparation of 
                financial statements; or
                    ``(B) recognize forms for such information and 
                accounting methods for such financial statements that 
                are established by a standard setting body recognized 
                by the Commission.
            ``(4) Internal controls and systems for large issuers.--
                    ``(A) In general.--Any issuer of, or other 
                obligated person with respect to, municipal securities 
                with outstanding municipal securities the aggregate 
                principal amount of which exceeds $10,000,000 shall 
                adopt internal controls and systems, including written 
                policies and procedures that, at a minimum--
                            ``(i) clearly identify the officials 
                        responsible for each aspect of disclosure 
                        described in paragraph (2)(B);
                            ``(ii) clearly state the process by which 
                        official statements described by paragraph 
                        (2)(A) are drafted and reviewed; and
                            ``(iii) provide checks and balances to 
                        ensure adequate supervision and reasonable 
                        disbursement of responsibilities.
                    ``(B) Statewide systems.--The Commission may 
                provide by rule that the provisions of this paragraph 
                may be satisfied with respect to an issuer or other 
                obligated person within a State by a statewide system 
                of disclosure controls and disclosure education for 
                such State.''.
    (b) Safe Harbor for Forward-Looking Statements.--Section 21E(a) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78u-5(a)) is amended--
            (1) by redesignating paragraphs (2), (3), and (4) as 
        paragraphs (3), (4), and (5), respectively;
            (2) by inserting after paragraph (1) the following:
            ``(2) an issuer or other obligated person that is subject 
        to and in compliance with the requirements of section 
        15B(f);'';
            (3) in paragraph (3), as so redesignated, by striking 
        ``such issuer'' and inserting ``an issuer or other obligated 
        person described in paragraph (1) or (2)'';
            (4) in paragraph (4), as so redesignated, by striking 
        ``such issuer making a statement on behalf of such issuer'' and 
        inserting ``an issuer or other obligated person described in 
        paragraph (1) or (2) making a statement on behalf of such 
        issuer or other obligated person''; and
            (5) in paragraph (5), as so redesignated, by striking 
        ``such issuer or information derived from information provided 
        by such issuer'' and inserting ``an issuer or other obligated 
        person described in paragraph (1) or (2) or information derived 
        from information provided by such issuer or other obligated 
        person''.
    (c) Conforming Amendments.--
            (1) Definition of exempted security.--Section 
        3(a)(12)(B)(ii) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a)(12)(B)(ii)) is amended by striking ``sections 15 
        and 17A'' and inserting ``sections 15, 15B(f) and 17A''.
            (2) Authority to exempt issuers.--Section 12(h) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78l(h)) is amended 
        by striking ``or 15(d)'' and inserting ``15(d), or 15B(f)''.

SEC. 4. EFFECTIVE DATE.

    Each amendment made by this Act shall take effect on the date that 
the Securities and Exchange Commission--
            (1) determines is appropriate in the public interest and 
        for the protection of investors; and
            (2) notifies the Congress of such determination.