The Securities and Exchange Commission has charged the City of Harrisburg, Pa., for misleading investors about its financial health, indicating such failure has affected the validity of municipal bond disclosure documents, including housing bonds.
The SEC order notes that the City of Harrisburg did not disclose accurate financial information during its annual State of the City Address, and in its financial and budget reports.
The SEC action matters because it sets precedent, according to William Rhodes, a partner with Ballard Spahr. It is “the first SEC action against a state or local government based on public statements made separately from required
It also is the first time “failure of a municipal securities issuer to post continuing disclosure information on the Electronic Municipal Market Access website” is considered as fraud.
Ballard Spahr's public finance experts in a recent report said that market studies indicate “a significant number of municipal securities issuers are noncompliant” with at least some of their continuing disclosure obligations.
Hence, “the SEC’s order has larger implications for the municipal bond market,” they wrote.
Meanwhile, the city consented to the SEC’s order without admitting or denying the allegations and no fines have been imposed.
