Rule 15c2-12

What is Rule 15c2-12??

It is a rule of the Securities and Exchange Commission (S.E.C.) that requires disclosure of certain financial documents as outlined in the Continuing Disclosure Agreements that are included in the documentation prepared for borrowing money for projects (Bonds).

This rule, which is under the Securities Exchange Act of 1934, sets forth certain obligations of:

• (i) underwriters [Fiscal Advisors] to receive, review and disseminate official statements prepared by issuers [Town of New Hartford] of most primary offerings of municipal securities,
• (ii) underwriters [Fiscal Advisors] to obtain CDAs from issuers [Town of New Hartford] and other obligated persons to provide listed event disclosures and annual financial information on a continuing basis, and
• (iii) broker-dealers to have access to such continuing disclosure in order to make recommendations of municipal securities in the secondary market.

Continuing Disclosures consist of important information about a municipal security that arises after the initial issuance of the bond. This information generally reflects the financial or operating condition of the government or agency issuing the bond over time, as well as specific events occurring after issuance that may have an impact on the ability of the issuer to repay the bond, the value of the bond if it is bought or sold prior to its maturity, the timing of repayment of principal, and any number of other key features of the bond. This information is prepared by the state or local government or other agency issuing the bond.

The Continuing Disclosure Agreement for the Town of New Hartford is found in the each Official Statements (the offering document) prepared by Fiscal Advisors & Marketing, Inc. [which is located in Syracuse, NY] as part of each public offering of the Town of New Hartford municipal securities.

Since we are talking about the difficulty of obtaining a copy of the 2021 Financial Statements prepared by Drescher & Malecki LLP through a FOIL request, it might be a good time to look at the Official Statement of the town bond offering in 2019 to see their obligations under Rule 15c2-12.

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So the Town of New Hartford has agreed to provide an audit by June 30th of each year throughout the time there is any outstanding bond debt and if the audit is not available at that time, they will provide a copy of the unaudited report that under General Municipal Law 30 is required to be submitted to the NYS Comptroller no later than May 1st each year.

However, the town did not live up to that agreement in June 2022 when they submitted documentation for their Continuing Disclosure as of December 31, 2021.

The documents submitted to the S.E.C. were prepared by Fiscal Advisors and clearly state they are:

ANNUAL FINANCIAL INFORMATION AND OPERATING DATA FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021.

However, as required under Rule 15c2-12 there was no copy of the 2021 Annual Update Document or the 2021 Audited Financial Statements included.

Instead, Fiscal Advisors prepared a report and included the 2020 Financial Audit prepared by Drescher & Malecki, a report that is totally useless because of its age.  What good is a 2020 report to investors in 2022?

The reason given for why the 2021 Annual Update Document (AUD) which is required to be filed in the NYS Comptroller's Office by May 1 each year was not included was, and I quote:

"Such Financial Report was prepared as of date thereof and has not been reviewed and/or updated in connection with the preparation and dissemination of this Continuing Disclosure Statement."

I find this statement to be laughable since I have a copy of the 2021 AUD and the cover letter was signed by Drescher & Malecki on April 29, 2022.

The certification page of the 2021 AUD was signed by Drescher & Malecki LLP and Town Supervisor Paul Miscione on April 29, 2022 as well:

On June 9, 2022, a legal notice appeared in the Observer Dispatch regarding the 2021 AUD:

So, according to the legal notice, the 2021 AUD is available as a public record even though it "hasn't been reviewed and/or updated" by the town board.  However, it is not ready to send to the S.E.C.

The legal notice further goes on to say:

"Pursuant to General Municipal Law 35, the governing board of the Town of New Hartford may, in its discretion, prepare a written response to the document and file any such response in my office as a public records for inspection by all interested persons not later than July 28, 2022 (within 90 days).

I assume that the office the response is supposed to be filed in is Town Clerk Cheryl Jassak-Huther since she is the one who placed the legal notice with the Observer Dispatch.

Well, it's now March 18, 2023 and neither the 2021 AUD or the 2021 audited financial statements have been submitted to the S.E.C. as required under Rule 15c2-12. Exactly when does the town board believe they might get around to their review???

Let me ask a rhetorical question.

Does anyone reading this blog believe that there is anyone on the town board with the knowledge to review and/or respond to the unaudited financial statements (AUD) prepared for the NYS Comptroller by Drescher & Malecki LLP???

Does any member of the town board even know what the AUD is? 

It's doubtful...they approved the 2022 contract for the AUD to be prepared by Drescher & Malecki on June 8th, a day before the notice appeared in the OD and over month after the 2022 AUD was already certified by both Drescher & Malecki LLP and Supervisor Miscione. Doesn't appear to me that the town board members are on top of things!

There were three (3) town board meetings between April 29, 2022 and June 30, 2022; town board minutes never made any mention of reviewing the AUD that was prepared by Drescher & Malecki. Discussions on town finances cannot be held during executive sessions.

If you knew you were under a contract to provide Continuing Disclosure to the Securities & Exchange Commission by June 30th, wouldn't you think you would make time during at least one (1) of the three (3) town board meetings to review the AUD with town board members so you were prepared to submit the report to the S.E.C. on time?? I am sure most people would, unless you were trying to hide something or you were completely incompetent!

This isn't Miscione's first time to deal with the requirement of the S.E.C. Continuing Disclosure requirements; it is an annual filing requirement.

Let me end this blog on this note...

Here are the findings of Dresher & Malecki during their 2019 & 2020 Financial Audit of the Town of New Hartford...wonder if the town board has seen these findings...

Finding 2019-002-Accounting System Controls and Oversight

Finding 2020-002-Audit Readiness and Monthly Closing Process

Where's the town board on all of this?? By their silence, they appear to be complicit in the apparent effort to hide key financial information from taxpayers!

There's more...stay tuned!



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