SEC Roots Out Corruption in Muni-Bond Underwriting

Respondents included a registered broker-dealer, in its capacity as a muni-bond underwriter in Indiana, and the executive vice president and supervisor of its relevant division. The SEC found a host of transgressions: (1) inadequate due diligence and, as a result, failure to form a reasonable basis for believing the truthfulness of material statements in an issuer’s official statement, resulting in offer and sale on the basis of a materially misleading disclosure document; (2) failure to enact procedures or take reasonable steps to ensure prompt notice of issuer submissions or failures to make required submissions; (3) fraudulent mischaracterization of expenses in reimbursement requests to issuers; and (4) providing improper entertainment and gratuities to representatives of issuers.