The Securities Exchange Commission announced June 18 the first major wave of underwriter sanctions under its Municipalities Continuing Disclosure Cooperation ("MCDC") Initiative. The SEC sanctioned 36 municipal underwriting firms a total of about $9 million. The SEC's Enforcement Division announced the MCDC Initiative in March 2014 as part of the Commission's increased focus on municipal markets. The Initiative aims to improve compliance with regulations requiring municipal-issuers to periodically update their financial disclosures - and did so by asking issuers and underwriters to self-report by September of last year those instances in which municipal-securities offering documents wrongly represented an issuer's prior compliance. The program tags underwriters for faulty due diligence in merely accepting issuer "check the box" representations. The MCDC Initiative already caused a spike in continuing-disclosure filings by issuers rushing to come into compliance. Although SEC Enforcement kicked off the Initiative with a first settled action by Kings County Joint Unified School District (an issuer), see '33 Act Rel. No. 9610 (July 8, 2014), this is the first wave of underwriter settlements. Under the Initiative, cooperating self-reporting municipal underwriters agreed to accept sanctions ranging from $20-60,000 per offering (capped at $100,000 to $500,000, depending on size and number of issues involved), cease and desist orders and independent-consultant review of municipal compliance programs. Thursday's sanctions among the 36 underwriters ranged from $40,000 to the maximum of $500,000. The SEC's Release is here: http://www.sec.gov/news/pressrelease/2015-125.html
Thomas K. Potter, III (email@example.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Resident in the Nashville office, Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile.
© 2015 by Thomas K. Potter, III (all rights reserved).