The Securities and Exchange Commission said Thursday that it had brought enforcement actions totaling approximately $9 million against 36 broker-dealers — including Raymond James, Merrill Lynch and Goldman Sachs — for misstatements and omissions in underwriting municipal bonds.
The cases are the first brought against underwriters under the Municipalities Continuing Disclosure Cooperation Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents.
Andrew Ceresney, director of the SEC’s Enforcement Division, said on a call to announce the settled administrative proceedings that the BDs “did not conduct adequate due diligence” before offering bonds to investors, and that the BDs “falsely stated they had complied in the past with ‘continuing disclosures.’”
In Thursday’s action, 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.
The Enforcement Division MCDC initiative announced was announced in March 2014 and 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.