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22 Firms Face $4.1M SEC Fine in Municipal Bond Probe

The U.S. Securities and Exchange Commission ("SEC") has slammed a $4.1-million penalty on another 22 firms for providing inappropriate and incomplete information regarding their compliance with disclosure obligations related to municipal bond offerings. The implicated underwriting firms include units of The PNC Financial Services Group, Inc. PNC , UBS Group AG UBS , UMB Financial Corporation UMBF and Fifth Third Bancorp FITB .

The news follows a similar fine of over $9 million imposed by the SEC on 36 banks, including biggies like Bank of America Corporation BAC , Citigroup Inc. C and The Goldman Sachs Group, Inc. GS , on same grounds earlier this year.

Allegations

The underwriting firms came under the SEC radar for allegedly misrepresenting their municipal bond offerings. The firms reportedly issued documents that enclosed inaccurate statements or omitted vital information regarding the issuers' compliance with continuing disclosure obligations. This rendered the sale of municipal bonds during 2010-2014 as an infringement.

In addition, the faulty documents could not be recognized and corrected owing to lack of due diligence on part of these firms, further worsening the situation.

The MCDC Initiative

In an attempt to coerce firms into voluntarily admitting to their faulty disclosure-related practices, the SEC launched the Municipal Continuing Disclosure Cooperation Initiative ("MCDC") last year. MCDC is a voluntary self-reporting program that provides favorable settlement terms to municipal bond underwriters and issuers who self-report securities law violations.

Given that the accused firms extend full cooperation to resolve the matter, they are generally let off with moderate fines. Besides, the initiative is also an attempt to restore bondholders' confidence in the $4-trillion municipal bond market by enhancing transparency in the same.

Penalty Details

Banks have been imposed with penalties in the range of $20,000-$500,000. PNC Capital Markets, a unit of PNC Financial, paid the highest penalty; while Fifth Third Securities, a unit of Fifth Third Bank, was charged the minimal fine. UBS and UMB Financial settled charges with $480,000 and $420,000, respectively.

Apart from the above-mentioned banks, U.S. Bancorp USB , BB&T Corporation BBT and Comerica Incorporated CMA were also penalized.

However, none of the firms admitted or denied the charges.

According to Andrew Ceresney, the director of enforcement division at SEC, "the initiative has been effective in improving underwriter due diligence in municipal securities offerings on a going-forward basis". Moreover, based on sources, the initiative is likely to expand its scope in order to bring state and local borrowers under its scanner as well.

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BB&T CORP (BBT): Free Stock Analysis Report

PNC FINL SVC CP (PNC): Free Stock Analysis Report

UBS GROUP AG (UBS): Free Stock Analysis Report

COMERICA INC (CMA): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

FIFTH THIRD BK (FITB): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

GOLDMAN SACHS (GS): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

UMB FINL CORP (UMBF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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