It’s time for issuers and underwriters of municipal securities to tattle–on themselves. The Securities and Exchange Commission has launched a Municipalities Continuing Disclosure Cooperation Initiative to encourage issuers and underwriters to self-report violations of federal securities laws, according to Kimberly Witherspoon of Haynsworth Sinkler Boyd.

The initiative will “recommend favorable settlement terms” if disclosure regarding materially inaccurate statements is made relating to prior compliance with the continuing disclosure obligations in the Securities Exchange Act, she says. Underwriters are generally prohibited from purchasing or selling municipal securities unless the issuer discloses certain information about financial conditions and operating data. And rules dictate that “any final official statement prepared in connection with a primary offering of municipal securities contain a description of any instances in the previous five years in which the issuer failed to comply,” says Witherspoon.

The SEC is now asking for issuers and underwriters to self-report any breaches of these conditions.

To be eligible, underwriters or issuers must accurately complete a questionnaire within the six-month period that began on Monday, explains Witherspoon. The material they’ll be required to disclose includes information on the potentially inaccurate statements; identity of the lead underwriter, municipal adviser, bond counsel, underwriter’s counsel and disclosure counsel; and facts that would assist the SEC staff to understand the circumstances leading to the inaccurate statements.