SEC Cracking Down on Municipal Bond Issuers/Liars?

For years now the only pieces of fiction I have been reading are either by Christopher Buckley or the auditors for Union County.  Whether it’s fudging OPEB disclosures or failing to mention raiding the Open Space Trust Fund (a $10 million annual tax that sunsets in 2020) to pay operating expenses this deceptive reporting (I mean by the auditors not Buckley) have kept investors, who heretofore have accepted as gospel that municipalities would somehow always pay back their bonds, in the dark and eventually out of luck and money.

Then came Detroit with their deceptive pension numbers and the SEC started worrying.

So to root out other Detroits the SEC earlier this year offered a deal:

The Municipalities Continuing Disclosure Cooperation Initiative (the “MCDC Initiative”) is intended to address potentially widespread violations of the federal securities laws by municipal issuers and underwriters of municipal securities in connection with certain representations about continuing disclosures in bond offering documents.

As described below, under the MCDC Initiative, the Division of Enforcement (the “Division”) of the U.S. Securities and Exchange Commission (the “Commission”) will recommend favorable settlement terms to issuers and obligated persons involved in the offer or sale of municipal securities (collectively, “issuers”) as well as underwriters of such offerings if they self-report to the Division possible violations involving materially inaccurate statements relating to prior compliance with the continuing disclosure obligations specified in Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Exchange Act”).

Did Union County make “materially inaccurate statements” in their bond disclosures? Last night’s freeholder meeting agenda included this resolution:

2014-664: Directing the undertaking of a continuing disclosure review and authorizing participation in the municipalities continuing disclosure cooperation initiative of the Division of Enforcement of the U.S. Securities and Exchange Commission.

Freeholder Kowalski sees nothing to worry about since the rating agencies love Union County:

But rating agencies are not the SEC which cannot so easily be bought off with over $500,000 in fees since 2004.

Freeholder Bergen calls anyone taking this response to the SEC program as anything other than good fiscal policy a liar:

The full Q&A from last night:

2 responses to this post.

  1. Posted by hondo on August 15, 2014 at 3:51 pm

    History always repeats itself. Wall Street big shots will so call take charge of failing pension then charge exorbitant fees then retire with a Golden parachute!


    • Posted by Tough Love on August 15, 2014 at 6:32 pm

      Your mean “Golden Parachutes” like the grossly excessive and unjust “Golden Pensions” Public Sector workers now routinely get at the expense of Private Sector Taxpayers ?


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