The NSSMC simplified the issuance of municipal bonds

The National Securities and Stock Market Commission (NSSMC) has approved new rules for the issuance and circulation of municipal bonds. They take into account changes in legislation and proposals from local authorities. Now communities will be able to raise funds for important projects more easily, while investors will better understand what they are investing in and under what conditions.

Previously, for each series of bonds, local councils had to go through the full registration procedure every time. Under the new rules, it is sufficient to approve a base document (the base prospectus) once, and then, if necessary, issue new series of bonds without repeating the entire procedure — this works according to the principle of a credit limit at a bank.

At the same time, the total amount of borrowing must remain within the annual limit approved by the Ministry of Finance, and the placement of the bonds must be completed by the end of the year.

For councils that have already registered a base prospectus, the NSSMC will review the documents for the registration of a new series of bonds under the final terms within up to 7 working days (the same short period will apply in the case of the approval of the base prospectus itself or for issuers whose securities are already traded on a regulated market). In other cases of a public offer, the review period will be up to 20 working days, and if the bond issue takes place without a public offer, up to 25 working days.

All applications, prospectuses and reports, as before, will be submitted through electronic cabinets in the NSSMC’s dedicated electronic system. If certain documents (for example, Resolutions of the local council or budget reports) have already been published on the community’s official website, it is sufficient simply to provide a direct link to them instead of attaching numerous copies.

To make it easier for potential investors to make decisions, communities must present key information about the bond issue in clear and understandable language. The summary of the prospectus may not exceed 15 pages and must clearly describe the main risks for investors.

Practical example

Imagine that the local authority (for example, the city council of your city) wants to modernize the trolleybus fleet, build an electrical substation, or purchase equipment that simultaneously generates electricity and heat (cogeneration units). The budget does not have enough funds for all these projects at the same time. The council decides to borrow the money from individuals or businesses by issuing bonds.

Previously, for each new series of bonds, the city council had to go through the registration procedure again. If six months later the city needed funds again—for an electrical substation or the purchase of equipment—the entire procedure had to be repeated.

Under the new rules, the city council prepares and registers a base prospectus once. When the city needs funds again, it can issue a new series of bonds without repeating the entire registration procedure.