SEC MCDC Bond Underwriter Fines: Round 1

HFA Partners  |  June 19, 2015

The SEC charged 36 municipal bond underwriting firms for alleged violations under the Municipalities Continuing Disclosure Cooperation Initiative announced in March 2014. Hospitals who self-reported last year are now wondering who's going to be next.


Back in December, we discussed the MCDC Initiative and the potential impact to not-for-profit hospitals and other municipal borrowers.

Yesterday, the SEC announced 36 municipal underwriters agreed to pay a total of $9.3 million and take remedial actions to settle charges that bond offering documents contained false or misleading statements about issuers meeting their continuing disclosure obligations, including Rule 15c2-12.

The firms did not admit or deny the findings but agreed to cease and desist from future violations.

The fines were based on number and size of alleged offenses, up to a cap based on each firm's size.

As a special bonus to the consulting sector, each firm agreed to retain an independent consultant to review its policies and procedures on conducting due diligence when preparing future municipal offferings.

The SEC statement notes that the settlements reflect "underwriters' cooperation in self-reporting their own misconduct and agreeing to improve their procedures going forward".

Some large firms were not included, but are expected to be part of subsequent SEC enforcement rounds.

Hospitals and other municipal borrowers who self-reported last year are now wondering if they'll be next on the SEC's list.

The only issuer who has settled with the SEC so far is an obscure California school district, and the SEC did not disclose the settlement terms.

It remains unclear as to what –if any—fines issuers who fail to self-report violations could face.

MCDC Round #1 - List of Firms and Penalty Amounts

  • The Baker Group, LP – $250,000
  • B.C. Ziegler and Company – $250,000
  • Benchmark Securities, LLC – $100,000
  • Bernardi Securities, Inc. – $100,000
  • BMO Capital Markets GKST Inc. – $250,000
  • BNY Mellon Capital Markets, LLC – $120,000
  • BOSC, Inc. – $250,000
  • Central States Capital Markets, LLC – $60,000
  • Citigroup Global Markets Inc. – $500,000
  • City Securities Corporation – $250,000
  • Davenport & Company LLC – $80,000
  • Dougherty & Co. LLC – $250,000
  • First National Capital Markets, Inc. – $100,000
  • George K. Baum & Company – $250,000
  • Goldman, Sachs & Co. – $500,000
  • Hutchinson, Shockey, Erley & Co. – $220,000
  • J.P. Morgan Securities LLC – $500,000
  • L.J. Hart and Company – $100,000
  • Loop Capital Markets, LLC – $60,000
  • Martin Nelson & Co., Inc. – $100,000
  • Merchant Capital, L.L.C. – $100,000
  • Merrill Lynch, Pierce, Fenner & Smith Incorporated – $500,000
  • Morgan Stanley & Co. LLC – $500,000
  • The Northern Trust Company – $60,000
  • Oppenheimer & Co. Inc. – $400,000
  • Piper Jaffray & Co. – $500,000
  • Raymond James & Associates, Inc. – $500,000
  • RBC Capital Markets, LLC – $500,000
  • Robert W. Baird & Co. Incorporated – $500,000
  • Siebert Brandford Shank & Co., LLC – $240,000
  • Smith Hayes Financial Services Corporation – $40,000
  • Stephens Inc. – $400,000
  • Sterne, Agee & Leach, Inc. – $80,000
  • Stifel, Nicolaus & Company, Inc. – $500,000
  • Wells Nelson & Associates, LLC – $100,000
  • William Blair & Co., L.L.C. – $80,000


This material is intended for general information purposes only and does not constitute legal advice. For legal issues, readers should consult legal counsel. To discuss this article or municipal advisory services, email info@hfapartners.com or call 888-699-4830. HFA Partners, LLC is an Independent Registered Municipal Advisor registered with the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB) under the Dodd-Frank Act of 2010.
© 2009-2017 HFA Partners, LLC.