Municipal Bond Firms Fined $9.3 million by SEC


The Securities and Exchange Commission fined 36 underwriting firms for inadequate financial disclosures in their sales of municipal bonds from 2010 to 2014. Citigroup, J.P. Morgan, Morgan Stanley and Merrill Lynch (Bank of America) were among the large group of companies that self-reported the potential violations of were fined between $60,000 to $500,000.

The offering documents at issue contained materially false statements or omissions concerning compliance by the issuers with ongoing disclosure requirements. According to the SEC’s Enforcement Chief Andrew Ceresney, investors rely on bond issuers and underwriters to regularly inform them of significant financial issues on the bonds. And the underwriters did not conduct adequate due diligence to discover the misstatements or omissions.

Collectively, the 36 companies underwrote 70 percent of the municipal bond offerings in the U.S. during the time period at issue. The municipal bond market is valued at $3.7 trillion.

The bond market has been an area of concern for the past few weeks as volatility and outflows in fixed income have raised concerns about the potential for problems in the bond market to spread to other areas of the economy. It wouldn’t be surprising to see bond whistleblowers coming forward from investment banks in the next five or ten years if the bond market goes into crisis mode the way that mortgage backed securities did during the Great Recession.

If you have evidence of improper underwriting by a financial institution, contact one of our SEC whistleblower attorneys to discuss reporting it via the whistleblower program. An attorney can be reached by either our contact form or by phone call to 1-800-590-4116.

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