On August 24th, the Securities and Exchange Commission announced enforcement actions against 71 municipal issuers for violations in municipal bond offerings.
According to the press release, the charges were brought under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents. The initiative offered favorable settlement terms to municipal bond underwriters, issuers, and obligated persons that self-reported certain violations of the federal securities laws. Obligated persons are typically nonprofit entities such as hospitals and colleges that borrow the proceeds of bond issuances and are obligated to pay principal and interest on the bonds.
Between 2011 to 2014, the SEC found that 71 issuers and obligated persons allegedly sold municipal bonds using offering documents that contained materially false statements or omissions about their compliance with continuing disclosure obligations. Continuing disclosure provides municipal bond investors with important information, including annual financial reports, on an ongoing basis.
According to the SEC’s 2012 Municipal Market Report the major challenge for investors seeing information about their bond holdings is the identified issuers’ failure to comply with their continuing disclosure obligations.
Based on the terms of the initiative, the parties settled the actions without admitting or denying the findings and agreed to cease and desist from future violations, they also agreed to undertake to establish appropriate policies, procedures, and training regarding continuing disclosure obligations; comply with existing continuing disclosure undertakings, including updating past delinquent filings, disclose the settlement in future offering documents, and cooperate with any subsequent investigations by the SEC.
The SEC has now filed a total of 143 actions against 144 respondents as part of the MCDC Initiative.
The foregoing information, which is publicly available on the SEC’s website, is being provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.
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