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November 11, 2014 at 11:03 AM
It’s been a year of many firsts for enforcement and regulation in the municipal bond market, an area to which the Securities and Exchange Commission has previously paid little attention.
“We have not historically placed tremendous attention in this area, and so you have lots of firsts,” said Andrew Ceresney, director of the SEC’s enforcement division, during a Monday afternoon panel discussion at the Securities Industry and Financial Markets Association’s annual meeting.
Ceresney went on to list a number of those “firsts.”
- The first financial penalty against a municipal issuer this past year in Wenatchee Valley, Washington.
- The first emergency action to halt a fraudulent municipal bond offering in the city of Harvey, Illinois.
- The first case charging a firm, TL Ventures Inc., with violating the pay-to-play rules for investment advisors.
- The first case under the Municipalities Continuing Disclosure Cooperation initiative, which was the Kings Canyon Joint Unified School District case.
- The first case charging violations of Municipal Securities Rulemaking Board Rule G-15(f), which establishes the “minimum denomination,” brought against a number of dealers related to Puerto Rico junk bond sales — just a couple of weeks ago.
- The first time the SEC has charged a municipal official under a federal statute that provides for “control person” liability in a case against the mayor of city of Allen Park, Michigan, filed this week.
“Our focus on this area has begun to change behavior,” Ceresney said. “We understand some have felt that this new focus is somewhat disruptive of the way the business has traditionally been done but I think it’s fair to say that this is a place where we’re here to stay, and you’re likely to see more enforcement activity rather than less in the municipal securities and public pension fund arena.”
For those in the municipal bond market, like Chris Hamel, managing director and head of the Municipal Finance Group for RBC Capital Markets, Ceresney’s list of firsts would be enough to make anyone nervous.
“Those kinds of firsts worry me, from the perspective that I intend not to be his next one,” Hamel said with a laugh, during SIFMA’s panel Monday afternoon.
Staying out of the SEC’s enhanced focus on the municipal bond market is “our job as managers,” he added.
