corporate governance and accounting standards, have revived the original debate over the proper regulation – and regulator -- of the two GSEs.<sup>117</sup> As noted above, issuers of municipal securities are not subject to Exchange Act reporting because the securities themselves are exempt from registration. However, in 1994, the SEC amended Rule 15c2-12 to add a continuing disclosure element for purposes of the secondary market. An underwriter subject to the Rule may not purchase or sell municipal securities unless the issuer of those securities has undertaken in writing<sup>118</sup> to make certain ongoing financial and operating information available on at least an annual basis. This information would be filed with the nationally recognized municipal securities information repository, or NRMSIR, and to the appropriate state information depository (SID), if one exists. In addition, the 1994 amendments introduced a “material event,” form of disclosure, similar to Form 8-K for corporate issuers, into municipal securities regulation. Under this provision, there are 11 enumerated events which, if material, require that notice be filed with each NRMSIR or the MSRB and appropriate SID. Finally, the Rule also requires that a notice be filed in the event of a failure of any person to provide the required annual financial information. In that event, the SEC has the authority to bring an enforcement action.

Corporate debt securities, unlike government, GSE, and municipal securities, are not exempt securities and thus would be subject to Exchange Act registration and reporting. However, the periodic and continuous disclosure requirements for post-offering disclosures of corporate debt are limited, compared to the requirements for post-offering disclosures on the equity side. Corporate debt issuers usually are not required to register their securities under Section 12 of the Exchange Act (unless they intend to list the securities on an exchange or on NASDAQ) because they generally have a limited number of holders. For these issuers, who become subject to the Exchange Act pursuant to Section 15(d) of the Exchange Act because they have securities registered under the Securities Act, there is only a limited reporting scheme. Such issuers may stop reporting after they file their first annual report on Form 10-K, if they have fewer than 300

> 117 The GSEs continue to create headlines that have caused many to call into question their special status under US regulation, and to consider whether their regulation by OFHEO is sufficient.  On October 29, 2003, Fannie Mae announced that it had made “honest mistakes” in its financial statements, following which OFHEO announced a special review of accounting practices at Fannie Mae. _See Accounting Concerns Hurt US Mortgage Giants,_ AccountancyAge .Com, November 17, 2003.  Freddie Mac restated its profits for the past 3 years by $5 billion, NYTimes.Com, November 21, 2003, and, on December 9, - 2003, entered into a consent decree with OFHEO in which it agreed to pay $125 million.  www.alwayson <u>network.com.  More generally,</u> _see, e.g., Regulation of Fannie Mae and Freddie Mac:  Mission, Safety & Soundness, and Disclosure,_ Mortgage Bankers Association of America, October 2003, _Legislation on Fannie Mae and Freddie Mac,_ Statement of the Shadow Financial Regulatory Committee, <u>www.aei.org/publications, September 22, 2003.</u>

118 The obligation can also be assumed by a person for whom financial or operating data is presented in the final offering statement.

32