Municipal-bond fraud verdict against Miami could cause increase in SEC enforcement actions
After a federal jury Wednesday found that the city of Miami committed fraud when it sold more than $150 million in municipal debt, it’s likely that the Securities and Exchange Commission will bring similar actions against other cities, Reuters reports.
The SEC accused the Florida city and Michael Boudreaux, its former budget director, of “playing a shell game” by shifting money around its accounts to conceal financial problems from investors. It only took the jury a few hours to return its verdict, Reuters reports.
In 2010, the agency launched a special enforcement unit for municipal securities and public pensions. Prior to that, it engaged in light enforcement for municipal bond regulation, due to a belief that juries in enforcement actions would not want to find for penalties that municipalities would pass on to taxpayers.
Since 2012, the SEC has brought 19 cases against municipalities alleging faulty disclosures, and most of the cases have settled or resulted in default judgments, according to Reuters. Also, in the past three years, eight officials received SEC fines.
“It is truly a sea change and we have seen the SEC ramp up its municipal enforcement very aggressively,” Stephen Crimmins, a former head of the SEC’s trial unit, told Reuters.
