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SEC charges 36 financial institutions for fraudulent securities
by Joseph Earnest June 19, 2015
Newscast Media WASHINGTON—The Securities and Exchange Commission has announced enforcement actions against 36 municipal underwriting firms for violations in municipal bond offerings. The cases are the first brought against underwriters under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents.
The Enforcement Division initiative announced in March 2014, offered favorable settlement terms to municipal bond underwriters and issuers who self-reported securities law violations. The first issuer charged under the initiative settled with the SEC in July 2014.
The 36 firms, which did not admit or deny the findings, agreed to cease and desist from such violations in the future. Under the terms of the MCDC initiative, they will pay civil penalties based on the number and size of the fraudulent offerings identified, up to a cap based on the size of the firm. The maximum penalty imposed is $500,000. In addition, each firm agreed to retain an independent consultant to review its policies and procedures on due diligence for municipal securities underwriting. Below are the 36 firms with penalty amounts:
• The Baker Group, LP – $250,000
• B.C. Ziegler and Company – $250,000
• Benchmark Securities, LLC – $100,000
• Bernardi Securities, Inc. – $100,000
• BMO Capital Markets GKST Inc. – $250,000
• BNY Mellon Capital Markets, LLC – $120,000
• BOSC, Inc. – $250,000
• Central States Capital Markets, LLC – $60,000
• Citigroup Global Markets Inc. – $500,000
• City Securities Corporation – $250,000
• Davenport & Company LLC – $80,000
• Dougherty & Co. LLC – $250,000
• First National Capital Markets, Inc. – $100,000
• George K. Baum & Company – $250,000
• Goldman, Sachs & Co. – $500,000
• Hutchinson, Shockey, Erley & Co. – $220,000
• J.P. Morgan Securities LLC – $500,000
• L.J. Hart and Company – $100,000
• Loop Capital Markets, LLC – $60,000
• Martin Nelson & Co., Inc. – $100,000
• Merchant Capital, L.L.C. – $100,000
• Merrill Lynch, Pierce, Fenner & Smith Incorporated – $500,000
• Morgan Stanley & Co. LLC – $500,000
• The Northern Trust Company – $60,000
• Oppenheimer & Co. Inc. – $400,000
• Piper Jaffray & Co. – $500,000
• Raymond James & Associates, Inc. – $500,000
• RBC Capital Markets, LLC – $500,000
• Robert W. Baird & Co. Incorporated – $500,000
• Siebert Brandford Shank & Co., LLC – $240,000
• Smith Hayes Financial Services Corporation – $40,000
• Stephens Inc. – $400,000
• Sterne, Agee & Leach, Inc. – $80,000
• Stifel, Nicolaus & Company,Inc.– $500,000
• Wells Nelson & Associates, LLC – $100,000
• William Blair & Co., L.L.C. – $80,000.
“The MCDC initiative has already resulted in significant improvements to the municipal securities market, including heightened awareness of issuers’ disclosure obligations and enhanced disclosure policies and procedures,” said SEC Chair Mary Jo White. “This ongoing enforcement initiative will continue to bring lasting changes to the municipal securities markets for the benefit of investors.”
In today’s actions, the SEC alleged that between 2010 and 2014 the 36 firms violated federal securities laws by selling municipal bonds using offering documents that contained materially false statements or omissions about the bond issuers’ compliance with continuing disclosure obligations. The underwriting firms also allegedly failed to conduct adequate due diligence to identify the misstatements and omissions before offering and selling the bonds to their customers.
“The settlements announced today reflect these underwriters’ cooperation in self-reporting their own misconduct and agreeing to improve their procedures going forward,” said LeeAnn Ghazil Gaunt, Chief of the Enforcement Division’s Municipal Securities and Public Pensions Unit. Add Comments>>
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