SEC says 71 municipal borrowers lied about disclosure histories

The U.S. Securities and Exchange Commission said it reached settlements with 71 state and local borrowers for lying to investors about their compliance with disclosure requirements when they sold bonds in the $3.7 trillion municipal market.

Issuers from New York’s Syracuse University to Boulder County, Colorado, to Hawaii voluntary self reported “materially false statements or omissions about their compliance with continuing disclosure obligations” in bond offering documents from 2011 to 2014, the SEC said in a statement. Muni issuers are required to provide investors with annual financial reports and other material event information that could affect the value of their debt.

“Continuing disclosure failures were a widespread and pervasive problem in the municipal bond market,” Andrew Ceresney, director of the SEC enforcement division, said in the statement. The actions will bring attention to disclosure problems in the market and lead to increased compliance, he said.

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The actions came under an SEC initiative to crack down on disclosure failures by offering issuers favorable settlement terms in exchange for self-reporting material misstatements and omissions about their compliance with disclosure requirements. Under terms of the settlement the issuers will “cease and desist” from future violations and establish procedures to ensure compliance in the future. The SEC has brought actions against 143 issuers in the market, according to the release.

In 2012 the SEC said in a report that failure to properly comply with disclosure requirements was “a major challenge” for investors trying to find information about their municipal-bond holdings. In February, 14 underwriters agreed to settle allegations by the SEC that they issued bonds for municipalities that failed to make adequate disclosures.