Cedar Rapids among 71 public entities charged with SEC violations
The federal Security and Exchange Commission charged Cedar Rapids and 70 other public entities, including towns, school districts, transportation authorities, universities and states, on Wednesday for violating disclosure rules for municipal bond offerings.
The Ohio State University, the states of Hawaii and Minnesota, the Departments of Transportation in Colorado and Montana, and Syracuse University were among larger agencies penalized. West Des Moines was the only other Iowa entity charged.
Cedar Rapids self-reported violations of the Securities Act of 1933 in November 2014 as part of the SEC Division of Enforcement’s Municipalities Continuing Disclosure Cooperation Initiative. The city proposed a settlement, which has been accepted, according to an SEC order of findings, remedial sanctions and cease and desist violating the law.
The order signed by SEC Secretary Bruce J. Fields was released on Wednesday.
As part of the settlement Cedar Rapids didn’t admit to nor deny the findings but agreed to cease and desist from further violations, overhaul policies and procedures, require training, update delinquent filings, and continue cooperation with further SEC investigation.
Cedar Rapids declined to comment beyond the SEC order and statement on the matter.
Cedar Rapids was four and five months late, respectively, in filing audited financial statements for the 2007 and then 2008 fiscal budget years. The city also failed to update the Electronic Municipal Market Access system with audited financial statements for fiscal 2009 and 2011, annual financial information and operating data for 2008 through 2012, and didn’t properly provide notice of the late filings.
Then in municipal bond offerings in 2012, 2013, and 2014, Cedar Rapids failed to disclose the violations and made misstatements by claiming to have remained in compliance with the law.
“(Cedar Rapids) knew or should have known that these statements were untrue and/or misleading,” according to the SEC order.
A failure to comply with rules governing continued disclosure of financial information, which is essential information for investors, had become a major challenge, according to the SEC.
“The diversity among the 71 entities in these actions demonstrates that continuing disclosure failures were a widespread and pervasive problem in the municipal bond market,” said Andrew Ceresney, director of the SEC Enforcement Division. “The MCDC Initiative has brought attention to this important issue and resulted in increased compliance by municipal issuers and underwriters.”