Securities and Exchange Commission (SEC) officials have detailed a complaint against four underwriting firms, alleging failure to comply with municipal bond offering disclosure requirements.
The SEC indicated it filed a litigated action against Oppenheimer & Co. Inc. while separately announcing settlements with BNY Mellon Capital Markets LLC, TD Securities (USA) LLC, and Jefferies LLC.
Per the SEC’s complaint and the settled orders, during different periods since 2017, the firms sold new issue municipal bonds without obtaining required disclosures for investors.
The SEC also alleged each of the firms relied on an exemption to the typical disclosure requirements called the limited offering exemption but did not take the steps necessary to satisfy the exemption’s criteria.
According to the SEC, the complaints represent the agency’s first actions addressing underwriters failing to meet the legal requirements exempting them from obtaining disclosures for investors in certain offerings of municipal bonds.
“I applaud the excellent work of the Division’s Public Finance Abuse Unit in bringing these first-ever actions in the $4 trillion municipal bond space,” SEC Division of Enforcement Director Gurbir S. Grewal said. “We encourage underwriters to examine their practices and to self-report any failures to us before we identify them ourselves.”
The SEC order maintains that BNY, TD, and Jefferies each violated Rule 15c2-12 under the Securities Exchange Act of 1934, establishing disclosures that must be provided to investors and Municipal Securities Rulemaking Board (MSRB) Rule G-27 and Section 15B(c)(1) of the Exchange Act.
The three firms agreed to settle the charges, cease and desist from future violations of those provisions, be censured, and pay the monetary relief – without admitting or denying the SEC’s findings.
The complaint against Oppenheimer & Co. Inc. seeks permanent injunctions, disgorgement plus prejudgment interest, and a civil money penalty.