Category: Municipal Securities
Sixth Circuit Weighs Challenge to its Jurisdiction in Lawsuit Brought by GOP Committees against the SEC
The Republican parties of three states—Tennessee, Georgia, and New York—recently brought a lawsuit in the Sixth Circuit Court of Appeals against the Securities and Exchange Commission to challenge revised Rule G-37, which the Municipal Securities Rulemaking Board (“MSRB”) published earlier this year to limit pay-to-play practices in the municipal securities area. The revision extended Rule G-37 to cover not only brokers and dealers of municipal securities but also municipal advisers. It prohibits those advisers from engaging in municipal advisory business with a municipal entity for two years if the adviser, its staff, or its political action committee made a significant contribution to an official who could influence the award of municipal securities business. The rule also requires certain covered entities, such as municipal advisers, to publicly disclose contributions to government officials. The plaintiffs claim this new extension of the rule … Read More »
SEC Resolves First Case Under New Municipalities Continuing Disclosure Cooperation Initiative
On July 8, 2014, the SEC announced that it had settled charges that a school district in California misled bond investors about its failure to comply with its continuing disclosure obligations under Rule 15c2-12 of the Exchange Act. Pursuant to the Municipalities Continuing Disclosure Cooperation (“MCDC”) Initiative, Kings Canyon Joint Unified School District, without admitting or denying the SEC’s findings, agreed to entry of an Order (1) finding that it was in violation of Section 17(a)(2) of the Securities Act, (2) requiring it to cease and desist from violating Section 17(a)(2), (3) requiring it to establish written policies and procedures and to conduct periodic training regarding continuing disclosure obligations, and (4) requiring it to cooperate with the Enforcement Division in any subsequent investigation and to disclose the settlement in future bond offering materials. The SEC did not order any disgorgement … Read More »
The SEC’s Municipalities Continuing Disclosure Cooperation Initiative: Carrot for Issuers & Underwriters, Stick for Individuals
It’s no secret that the SEC is stepping up its enforcement efforts in the estimated $3.7 trillion municipal securities market. In 2012, the Commission published a 165-page report calling for Congress to give it more authority to improve disclosures in municipal bond offerings. See SEC’s Report on the Municipal Securities Market (July 31, 2012). In the last year, the Commission has filed a number of enforcement actions against municipal bond issuers and underwriters based on alleged misstatements or omissions concerning various topics, including: compliance with tax exemption requirements, continuing disclosure obligations, and debt limitations and property values.
Most recently, in March 2014, the SEC launched a new cooperation initiative designed to encourage issuers and underwriters of municipal securities to self-report certain violations of federal securities laws. Under the Municipalities Continuing Disclosure Cooperation Initiative (“MCDC Initiative”), SEC staff will recommend favorable settlement terms … Read More »
