The Washington, D.C.-based Securities and Exchange Commission on Tuesday announced enforcement actions against 14 municipal underwriting firms, including TD Securities (USA) LLC, for violations in municipal bond offerings.
The SEC found that the 14 firms sold municipal bonds using offering documents that “contained materially false statements or omissions about the bond issuers’ compliance with continuing disclosure obligations,” the SEC says in a statement. The SEC also found that the underwriters failed to conduct adequate due diligence to identify the misstatements before selling the bonds to their customers.
The 14 firms did not admit or deny the findings, but they agreed to pay civil penalties and to cease and desist from violations in the future. Each firm also agreed to retain an independent consultant to review its policies and procedures on due diligence for municipal securities underwriting.
Today’s actions conclude charges against underwriters under the SEC’s Municipalities Continuing Disclosure Co-operation Initiative, the SEC statement says.
The program, which was launched in March 2014, offered favourable settlement terms to underwriters and issuers that self-reported violations. The first batch of enforcement actions against underwriters involved 36 firms, another 22 firms were charged in September 2015. All of the firms settled the actions and paid civil penalties up to a maximum of US$500,000.
Andrew Ceresney, director of the SEC’s enforcement division, says that the settlements “… have brought much-needed attention to disclosure obligations in municipal bond offerings. As part of the settlements, 72 underwriting firms – comprising approximately 96% of the market share for municipal underwritings – have agreed to improve their due diligence procedures and we expect that investors will benefit from those improvements.”
The SEC’s initiative is continuing for issuers that may have provided investors with inaccurate information about their compliance with continuing disclosure obligations.