The cases are the first brought against underwriters under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents.
The Enforcement Division initiative announced in March 2014, offered favorable settlement terms to municipal bond underwriters and issuers who self-reported securities law violations.The first issuer charged under the initiative settled with the SEC in July 2014.
“The MCDC initiative has already resulted in significant improvements to the municipal securities market, including heightened awareness of issuers’ disclosure obligations and enhanced disclosure policies and procedures,” said SEC Chair Mary Jo White. “This ongoing enforcement initiative will continue to bring lasting changes to the municipal securities markets for the benefit of investors.”
In today’s actions, the SEC alleged that between 2010 and 2014 the 36 firms violated federal securities laws by selling municipal bonds using offering documents that contained materially false statements or omissions about the bond issuers’ compliance with continuing disclosure obligations. The underwriting firms also allegedly failed to conduct adequate due diligence to identify the misstatements and omissions before offering and selling the bonds to their customers.