SEC Charges School District with Misleading Investors (with Lofchie Comment)

The SEC charged Kings Canyon Joint Unified School District ("Kings Canyon") with misleading bond investors about its failure to provide contractually required financial information and notices. The case is the first to be resolved under a new SEC initiative to address materially inaccurate statements in municipal bond offering documents.

The SEC found that in the course of a 2010 bond offering, Kings Canyon affirmed to investors that it had complied with its prior continuing disclosure obligations. According to the SEC, this statement was inaccurate because the school district had failed to submit some required disclosures between 2008 and 2010.

Lofchie Comment: Tougher regulatory review of statements by governmental bodies and elected officials regarding weak public finance disclosure is likely to lead to more enforcement actions.

See: SEC Order; SEC Press Release. Related news: Cadwalader Enforcement Advisor: "SEC Launches Municipalities Continuing Disclosure Cooperation Initiative (with YouTube Selection) (March 27, 2014); SEC Announces Enforcement Cooperation Initiative for Municipal Issuers and Underwriters (with Bondi Comment) (March 10, 2014).