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12 Urb. St. & Loc. L. Newsl. 1 (1988-1989)

handle is hein.journals/stlolane27 and id is 1 raw text is: Section of Urban, State and Local Government Law Vol. 12, No. 1, Fall 1988 URBAN, STATE ad LOCAL LAW NEWSLET TER Recent Federal and State Blue Sky Law Developments Affecting Local Government Securities By Patrick K. Arey State and local governments have historically been able to issue and sell their obligations without reg- istration under federal or state securities (blue sky) laws. Recent nationally publicized bond defaults, such as the Washington Public Power Supply System (WPPSS),' and other local defaults of revenue bonds, together with lobbying efforts by the WPPSS Bond- holders' Committee2 have resulted in significant changes in state blue sky laws and the registration requirement. These developments affect sales of mu- nicipal securities in Florida, New Jersey, Minnesota, Arizona, Texas, Pennsylvania, and, potentially, New York, depending upon the type of obligation, the lo- cation of the issuer, and the market in which the securities will be sold. As a general rule, these developments affect pri- marily revenue obligations, although general obliga- tions may be affected in particular instances. Similarly, some recent developments affect only issuers located in a particular jurisdiction (or may exempt issuers within a particular jurisdiction). However, the de- velopments do not appear to affect transactional ex- emptions from the securities registration requirement, such as sales to banks and institutional investors. The following is a summary, by state, of recent and possible new developments. Florida A recent amendment to the Florida Securities and Investor Protection Act provides that the registra- tion exemption for govern- mental securities will not be available in the case of rev- enue bonds where the issuer has defaulted in payment of principal or interest at any time after December 3 1, 1975,. unless full disclosure is made regarding each default.' Florida Blue Sky Rule 3E-400.0034 sets forth a list of nine specific items required to be disclosed regarding each default, including the amount, the na- ture of the default, legal, civil or criminal proceedings relating to the default, the name of the trustee or any receiver, and their respective fees and expenses. Un- der this rule, an issuer may choose not to disclose any such default provided a statement is included in the offering document to the effect that the disclosure requirement exists under state law and the issuer sets forth its reasons why it does not believe any such default is material to investors in the current offering. Defaults requiring disclosure include both direct and guaranteed obligations of the issuer. This requirement does not apply to offerings of general obligation bonds. One difficulty with this rule, however, is that issuers of conduit revenue bonds such as industrial development bonds or private activity bonds may not be aware of defaults in such bond issues, particularly where the issue was pri- vately placed to an institutional investor. Accord- ingly, under such circumstances, an issuer might limit any certification or representation regarding the ab- sence of prior defaults to its actual knowledge of any such default. In this issue Chairman's Message ................... 2 Supreme Court Watch ................. 3 Washington's Labyrinthine Ways... 5 The Impact of AIDS .................. 9 Section N ew s ........................... 12 New Jersey Effective November 1987, New Jersey amended its blue sky law to provide that the registration exemption for governmental securities would not be available to any governmental entity (continued on page 14) Section of Urban, State and Local Government Law Vol. 12, No. 1, Fall 1988

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