SEC sanctions 22 underwriting firms for fraudulent bond offerings

By Cate Chapman on September 30, 2015

The Securities and Exchange Commission announced enforcement actions, including more than a combined $4 million in penalties, against 22 municipal underwriting firms for violations in municipal bond offerings.

The actions are the second round of filings against underwriters under the Municipalities Continuing Disclosure Cooperation Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents, the SEC said in a Sept. 30 press release.

The commission found that between 2010 and 2014, the 22 underwriting 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 were also found to have failed to conduct adequate due diligence to identify the misstatements and omissions before offering and selling the bonds to their customers.

The 22 firms, which did not admit or deny the findings, agreed to cease and desist from such violations in the future. Under the terms of the MCDC Initiative, they will pay civil penalties based on the number and size of the fraudulent offerings identified, up to a cap based on the size of the firm.  The maximum penalty imposed is $500,000.  In addition, each firm agreed to retain an independent consultant to review its policies and procedures on due diligence for municipal securities underwriting.

The SEC’s orders and penalty amounts are:

Ameritas Investment Corp. – $200,000
BB&T Securities LLC – $200,000
Comerica Securities Inc. – $60,000
Commerce Bank Capital Markets Group – $40,000
Country Club Bank – $140,000
Crews & Associates Inc. – $250,000
Duncan-Williams Inc. – $250,000
Edward D. Jones & Co. – $100,000
Estrada Hinojosa & Company – $40,000
Fifth Third Securities Inc. – $20,000
The Frazer Lanier Company – $100,000
J.J.B. Hilliard, W.L. Lyons LLC – $420,000
Joe Jolly & Co. – $100,000
Mesirow Financial Inc. – $100,000
Northland Securities Inc. – $220,000
NW Capital Markets Inc. – $100,000
PNC Capital Markets LLC – $500,000
Prager & Co. – $100,000
Ross, Sinclaire & Associates LLC – $220,000
UBS Financial Services Inc. – $480,000
UMB Bank, N.A. Investment Banking Division – $420,000
US Bank Municipal Securities Group, a Division of US Bank National Association – $60,000