Attention

The opinions expressed by columnists are their own and do not represent our advertisers

Friday, August 20, 2010

Alleging Securities Fraud, SEC Orders New Jersey To Cease And Desist

The state of New Jersey has settled a securities fraud lawsuit brought by the Securities and Exchange Commission, which accused it of selling $26 billion in municipal bonds [1] without proper disclosures about the state’s financial health.


The suit, which was filed and settled on Wednesday, is the first one of its kind [1] that regulator has ever brought against a state.

The action is evidence that regulators are increasing their scrutiny of the $2.8-trillion municipal bond market [2], over which the SEC does not wield [3] ($) a great deal of regulatory authority, as The Wall Street Journal has noted. (What are municipal bonds? Glad you asked [4].)


As things stand, the SEC can pursue violations of securities laws, as happened with New Jersey. And it can regulate underwriters and sellers of municipal securities, requiring them to demand certain disclosure from issuers.


But that means it "can only impose regulations through the back door," says Theresa Gabaldon, a George Washington University Law School professor. "It's pretty toothless and is a long way from the SEC being able to say, 'Hey, you issuers, you have to make specific disclosures.'"

GO HERE to read more.

No comments: