Public Charter Schools Borrowing With Tax-Exempt Bonds, Second ...

sessions. Parties also conduct a “due diligence” investigation with respect to the
official statement involving inquiries of school officials and review of supporting
documentation. A preliminary official statement and an official statement are
generally not printed and distributed until all concerned parties are comfortable that
the information included is accurate and complete.
2. Public Charter School Responsibilities. The anti-fraud provisions of the Securities
Act and the Exchange Act require that the information provided in connection
with the offer or sale of securities must not contain any untrue statement of
a material fact and must not omit to state a material fact necessary to make such
information not misleading. This is of critical importance to the public charter
school. The school is primarily liable for any material misstatements or omissions
regarding its operations or finances made in the documents used to offer and sell
the school’s securities. The school may not transfer this primary liability to its
underwriter, general counsel, bond or disclosure counsel or any of the other parties
involved in the financing. Such parties might be liable in their own right, but their
liability will not absolve the school of its primary liability. Consequently, the school
and its staff must make every effort to ensure that the school’s offering documents
are accurate and complete, and that the bond counsel and disclosure counsel be of
the highest quality and have significant resources.
3. Underwriter Obligations and Rule 15c2-12. Underwriters of municipal
securities are also subject to the anti-fraud and other provisions of the securities
laws. To protect themselves from liability, underwriters (usually with the assistance
of their counsel) must conduct an investigation of the public charter school’s
affairs and generally will require, as a condition to their obligation to purchase
the bonds, the delivery of certifications and opinions as to the completeness and
accuracy of the school’s offering materials.
In addition, Rule 15c2-12, adopted by the SEC under the Exchange Act,
places specific burdens upon the underwriters of municipal securities. First,
unless an exemption is available, Rule 15c2-12 requires an underwriter, prior
to any bid, purchase, offer or sale of a municipal security, to obtain and review
the official statement which the issuer “deems final as of its date,” exclusive
of certain pricing and underwriting information. In order to comply with
Public Charter Schools Borrowing With Tax-Exempt Bonds, Second Edition 41