SEC Continues Muni-Bond Fines Over Continuing Disclosure Obligations, Fining 22 More Underwriters

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Twenty-two municipal underwriting firms agreed to pay SEC penalties of between $20,000 and $500,000 for inaccurate disclosures to investors concerning the continuing disclosure obligations and compliance of municipal bond issuers. It is the second round of settlements against underwriters via the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative.

The program was announced by the Securities and Exchange Commission in March 2014 and offered standardized, favorable settlements for self-reported inaccuracies in bond offerings concerning compliance with continuing disclosure obligations specified in Rule 15c2-12 of the Exchange Act. This summer, the SEC brought enforcement actions against more than 30 municipal bond underwriters for material misstatements and omissions in offering documents voluntarily self-reported pursuant to the Initiative which was only open for a limited time.

Rule 15c2-12 requires information about an issuer’s failure to materially comply with continuing disclosure commitments for the past 5 years. It also prohibits underwriters from purchasing or selling municipal securities unless the issuer has committed to continuing disclosures. The Kings Canyon Joint Unified School District in California was the first to settle under the program in July 2014 for inaccurate investor disclosures in a 2010 bond offering.

The investment banks fined in this wave of announcements included PNC Capital Markets, UBS, Fifth Third Securities and Edward D. Jones & Co., among others.

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