The Securities and Exchange Commission (SEC) announced this week that 71 municipal issuers, including several cities, schools, and the states of Hawaii and Minnesota, had been charged with misleading investors. Without admitting or denying the allegations, all 71 parties agreed to settle, update their policies, and cooperate with any subsequent federal investigations.
“The diversity among the 71 entities in these actions demonstrates that continuing disclosure failures were a widespread and pervasive problem in the municipal bond market,” stated Andrew Ceresney, Director of the SEC Enforcement Division. “The MCDC (Municipalities Continuing Disclosure Cooperation) Initiative has brought attention to this important issue and resulted in increased compliance by municipal issuers and underwriters.”
A voluntary self-reporting program targeting misstatements and omissions in municipal bond offering documents, the MCDC Initiative encourages municipal bond underwriters, issuers, and obligated persons to self-report specific federal violations in exchange for favorable settlement terms. According to the SEC, obligated persons are typically nonprofit entities such as hospitals and colleges that borrow the proceeds of bond issuances and are obligated to pay principal and interest on the bonds.
Between 2011 and 2014, the SEC found that the 71 entities had sold municipal bonds with documents offering false statements. The issuers and obligated persons also failed to provide their investors with annual financial reports or any basic information concerning their municipal bond holdings.
Instead of facing trials, the parties agreed to settle the actions and to cease any future violations. The entities also agreed to update any policies, procedures, and training to include the disclosure of federal crimes while cooperating with any subsequent investigations.
Below is a list of the 71 entities that the SEC has accused of misleading investors.
Alabama:
City of Vestavia Hills
Board of Education of Madison County
Alaska:
Borough of North Slope
Arkansas:
Board of Trustees of Arkansas Tech University
California:
City of Alameda
Colorado:
Boulder County
Thompson School District No. R2-J
Colorado Department of Transportation
Connecticut:
Lawrence & Memorial Corp. and Lawrence & Memorial Hospital
Town of Fairfield
Delaware:
Delaware Transportation Authority
Georgia:
Fulton County
Hawaii:
State of Hawaii
Idaho:
Idaho Housing and Finance Association
Illinois:
Palatine Park District
Community Unit School District Number 18 (Blue Ridge)
Metropolitan Airport Authority of Peoria
Indiana:
City of Gary
Sanitary District of the City of Gary
City of South Bend
Iowa:
City of Cedar Rapids
City of West Des Moines
Kansas:
Unified School District No. 418 (McPherson County)
City of Andover
Kentucky:
Kentucky Housing Corporation
Electric and Water Plant Board of the City of Frankfort
Louisiana:
East Ouachita Parish School District
Maine:
Town of York
Maryland:
Montgomery College
Montgomery College Foundation
Massachusetts:
City of Chelsea
Michigan:
Berrien County
Minnesota:
State of Minnesota
Mississippi:
Lauderdale County
Missouri:
Ascension Health Alliance
Black Jack Fire Protection District of St. Louis County
Blair Oaks R-II School District
Montana:
Montana Department of Transportation
Nebraska:
City of Alliance
New Hampshire:
Southern New Hampshire University
New Jersey:
Borough of Roselle Park
Township of East Brunswick
New Mexico:
El Castillo Retirement Residences
New York:
Franklin County
City of Ithaca
Syracuse University
Westchester County Health Care Corporation
North Carolina:
North Carolina Eastern Municipal Power Agency
North Dakota:
City of Devils Lake
Ohio:
The Ohio State University
Oklahoma:
City of Nichols Hills
Oklahoma Housing Finance Agency
Yukon Municipal Authority
Pennsylvania:
Adams County
Collegium Charter School
Hazleton Area School District
Municipal Authority of the City of McKeesport
South Carolina:
City of Columbia
Town of Hilton Head Island
South Dakota:
Tea Area School District 41-5
Tennessee:
City of Memphis
Texas:
Pecos County
Utah:
Heber Light & Power Company
Vermont:
Casella Waste Systems
Virginia:
Carilion Clinic
Washington:
City of Bainbridge Island
Public Utility District No. 1 of Whatcom County
West Virginia:
County Commission of Ohio County
Wisconsin:
City of Oconomowoc
Wyoming:
Wyoming Community Development Authority
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