The Securities and Exchange Commission on Monday sanctioned 13 firms — including Charles Schwab, TD Ameritrade and Wedbush Securities — for improper sales of Puerto Rican junk bonds.
The enforcement actions are the SEC’s first under Municipal Securities Rulemaking Board Rule G-15(f), which establishes the “minimum denomination,” the smallest amount of the bonds that a dealer firm is allowed to sell an investor in a single transaction.
In its surveillance of trading in the municipal bond market, the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit detected improper sales below a $100,000 minimum denomination set in a $3.5 billion offering of junk bonds by the Commonwealth of Puerto Rico earlier this year.
The SEC’s subsequent investigation identified a total of 66 occasions when dealer firms sold the Puerto Rico bonds to investors in amounts below $100,000.
On Monday, the agency instituted administrative proceedings against the firms behind those improper sales, which were: Charles Schwab & Co., Hapoalim Securities USA, Interactive Brokers LLC, Investment Professionals Inc., J.P. Morgan Securities, Lebenthal & Co., National Securities Corp., Oppenheimer & Co., Riedl First Securities Co. of Kansas, Stifel Nicolaus & Co., TD Ameritrade, UBS Financial Services and Wedbush Securities.