What does the new wave of municipal securities enforcement cases mean for municipal underwriters?

The last several months have seen a notable uptick in municipal securities actions brought by the Securities and Exchange Commission’s (SEC’s) Enforcement Division.

Over that time, the SEC has brought more than half a dozen actions against issuers of municipal securities, ranging from the state of Illinois to the city of Miami. These cases, which have come with increasing frequency and regularity, have alleged fraudulent misstatements and omissions that have run the gamut from failing to disclose future pension obligations to lying about the intended use of bond proceeds. There is every reason to believe that these cases are not a blip. Indeed, the leadership of the SEC has said as much.

One SEC commissioner — Daniel M Gallagher — has clearly stated that he expects the resources put into the Municipal Securities and Public Pension Unit in the SEC’s Enforcement Division to yield a return of ‘high-quality cases’. Prior to her recent departure, SEC commissioner Elisse B Walter noted that ‘[t]here’s more [municipal securities cases] in the pipeline’…

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