In 2013, the Securities and Exchange Commission sought to demonstrate its resolve in enforcement by bringing more selective cases with a greater yield in financial penalties. Indeed, the SEC recently announced that its 2013 fiscal year enforcement program generated a record $3.4 billion in penalties. Its enforcement efforts in the areas of municipal securities and pension plans continued the trend, now seen over several years, of enforcement actions in new and unprecedented contexts, including the following: 

  • In May 2013, for the first time, the SEC brought an action against a city based on false statements made to the secondary municipal markets.
  • In the same matter, and also for the first time, the SEC cited a city’s failure to maintain current annual financials on the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access (EMMA) website as contributing to a “total mix” of information that was misleading.
  • In July 2013, for the first time, the SEC brought an action against a school district and its underwriter based on the school district’s false statements in offering documents that it was compliant with its continuing disclosure obligations and the underwriter’s due diligence failure to discover such noncompliance.
  • In November 2013, for the first time, the SEC assessed a financial penalty against a municipal securities issuer.

The SEC already has provided some indications about the areas it will focus on in 2014. For some time now, it has signaled its intent to pursue enforcement actions against individuals, and it now is clear that state and local government officials will fall within the SEC’s enforcement focus. The SEC also has signaled that it intends to recommit to its scrutiny of gatekeepers, such as lawyers and auditors, and that it considers underwriters to serve as gatekeepers. Indeed, the SEC brought several enforcement actions against underwriters in 2013, claiming that misleading disclosures to investors resulted from inadequate due diligence undertaken by underwriters.

Similarly, the SEC has broadened its enforcement efforts to include review of secondary market disclosures, and it seems certain that it will dedicate similar energy to its review of continuing disclosures. Further, the SEC announced a renewed focus on accounting fraud this fall, and this focus complements its already established enforcement efforts with respect to pension plan accounting and pension funding and related disclosures. Additional investigations in these areas seem likely, as well.

In the face of these unprecedented SEC enforcement efforts, municipal securities issuers and their officials should expect that primary and secondary market disclosures, particularly when made against the backdrop of news of challenging or negative financial performance, will receive SEC scrutiny. The benefits of the adoption and implementation of written disclosure policies and procedures to ensure the timeliness, currency, and completeness of the information provided to investors during and after a bond offering are demonstrable.

Municipal advisors, now newly regulated, should take note of the SEC’s increased enforcement activity against municipal market intermediaries. In addition to SEC and MSRB registration requirements, municipal advisors are currently subject to a federal fiduciary duty as well as the MSRB’s “fair dealing” rule, Rule G-17, and a more comprehensive regulatory regime is currently being rolled out by the MSRB.

Summaries of key municipal market SEC enforcement actions brought in 2013 can be found in the sections below:

Offering and Disclosure

Public Pension Accounting and Disclosure


Ballard Spahr's Municipal Securities Regulation and Enforcement Group advises its clients on the latest securities issues in their public finance transactions, including in regulatory and enforcement matters of the SEC. We advise issuers in a broad range of public offerings and private placements of municipal securities in both the primary and secondary market.

For further information, please contact John C. Grugan at 215.864.8226 or, or Tesia N. Stanley at 801.517.6825 or

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