SEC Brings Enforcement Actions against Underwriters of Municipal Securities

The SEC announced enforcement actions against 22 municipal underwriting firms for violations under the Municipalities Continuing Disclosure Cooperation ("MCDC") Initiative, a program of voluntary self-reporting that targets material misstatements and omissions in municipal bond offering documents.

The SEC found that between 2010 and 2014, the 22 underwriting firms violated federal securities laws by selling municipal bonds using offering documents that contained materially false statements or omissions concerning the bond issuers' compliance with continuing disclosure obligations. The SEC also found that the underwriting firms failed to conduct adequate due diligence to identify the misstatements and omissions before offering and selling the bonds to their customers.

The 22 firms, which neither admitted nor denied the findings, agreed to cease and desist from such violations in the future. Under the terms of the MCDC Initiative, the firms will pay civil penalties that are based on the number and size of the problematic offerings identified, and that reach caps that are based on the sizes of the firms. 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 underwritings.