Municipal Securities Dealer Censured for Advancing Expenses for Rating Agency Trips
A BD/municipal securities dealer was fined and censured for advancing travel and entertainment expenses to issuer officials and family members related to New York City trips to meet with rating agencies. The dealer invoiced (and was reimbursed) for the expenses out of bond proceeds. The SEC indicated that the issuer never sought reimbursement form the officials. The SEC charged violations of the MSRB rule prohibiting gifts in excess of $100 related to offerings.
OUR TAKE: The dealer disclosed the payments to the issuer and received reimbursement, so this isn’t really a pay-to-play case. We think the SEC is more concerned that the dealer was used as an intermediary to funnel kickbacks to the issuer officials out of bond proceeds.