Bond Accountability Commission 2 Recommendations Page 84
upon governing antifraud provisions) of all of the bond insurer’s disclosure information provided (or incorporated from other sources by reference) for use in a CMSD offering. We further recommend that CMSD obtain assurance that the underwriters of CMSD’s securities are able to conduct appropriate due diligence investigations of bond insurer information. In addition, we recommend that CMSD negotiate a liquidated damages agreement with any bond insurer that causes CMSD to incur additional costs as a result of a failure to make materially accurate and complete disclosure to CMSD and its investors. We further recommend that, if CMSD determines to purchase bond insurance, CMSD disclose to potential investors material information regarding the default risk significance of the relative ratings of CMSD and the bond insurer to avoid misleading investors into believing that a double-A (or triple-A) rating for a bond insurer equates with or is superior to the rating resulting from enhancement by the Ohio Department of Education’s Credit Enhancement Program, or for that matter, that bond insurance somehow provides a default risk profile that is superior to CMSD’s own unenhanced default risk profiles.
Published on May 14, 2014