Examining Charter School Bonds: What You Need to Know
Charter schools looking to finance school facilities need to be aware of the watchful eye of the Securities and Exchange Commission (SEC) and the risks associated with engaging the wrong financing team. The SEC has been cracking down on unregistered advisors providing inadequate or conflicting advice to charter schools, leaving them vulnerable to financial, reputational, and legal challenges.
When seeking advice on financing options and navigating the process, charter schools may not realize that these services are regulated under federal securities laws enforced by the SEC and the Municipal Securities Rulemaking Board (MSRB). It’s essential to know which advisors owe a fiduciary duty to the school (putting the school’s interests first) and which do not.
The SEC has been examining charter school bond financings for several years and taking action against firms and individuals who may have violated federal laws and regulations. Just recently, they charged a charter school advisory firm for failing to disclose material conflicts of interest in over $500 million of bond issues for charter schools. This demonstrates the importance of working with registered municipal advisors to avoid potential risks.
The SEC has issued an informational bulletin advising charter schools on what to know about municipal advisor regulation. The bulletin includes links to resources, such as lists of registered municipal advisors, making it easier for charter schools to determine the status of firms offering advice on financing school facilities.
It’s crucial for charter schools to report any potential unregistered municipal advisor activity or misconduct to the SEC. This can help prevent negative outcomes such as unfair pricing in a municipal bond issuance or other financial, reputational, and legal harms. Working with experienced legal advisors who understand tax-exempt bond financing and SEC enforcement activity can help charter schools navigate the facilities financing process and ensure compliance with federal securities and tax laws.
If you have questions or concerns about these matters and how legal advisors can assist, don’t hesitate to reach out for guidance.
