SEC Offers Pre-Packaged Enforcement Settlements
The SEC’s Division of Enforcement has launched the “Municipalities Continuing Disclosure Initiative” offering “favorable settlement terms” to municipal issuers and underwriters who self-report continuing disclosure violations. The Division asserts that there has been widespread violation of the securities laws by municipal issuers, who have failed to comply with their continuing disclosure obligations over the previous 5 years, and their underwriters, who have failed to conduct adequate due diligence. The “favorable settlement terms” will include a public cease and desist order and undertakings to increase disclosure and enhance policies and procedures. Underwriters may also pay penalties up to $60,000 per offering. The Division warns that there will be no settlements for individuals and that the self-reporting entities must cooperate in any investigations of individuals.
OUR TAKE: Is this perhaps a model that the Enforcement Division will use in other contexts? Will potential wrongdoers step forward and take a pre-packaged settlement rather than risk a litigation with more dire consequences?