The SEC has charged 12 municipal advisers for failure to maintain and preserve internal and external electronic communications.
All were censured and ordered to cease and desist from violating recordkeeping laws, and have agreed to pay civil penalties amounting in total to $1.3m and ranging from $40,000 to $324,000.
That brings the total value of fines levied by the SEC and CFTC since September 202 to almost $3.5 billion.
Off-channel communications
During its investigations, the SEC found that employees from all levels of seniority had participated in unpreserved off-channel communications.
An SEC press release stated that the firms failed to maintain and preserve communications related to municipal advisory activity as required under the Securities Exchange Act and the rules of the Municipal Securities Rulemaking Board (MSRB), the industry’s SRO.
These laws mandate that municipal advisers maintain and preserve all written communications relating to municipal advisory activities for at least five years.
All the charged firms have admitted to the accusations, and have begun to improve their compliance policies, according to the SEC.
“The books and records requirements are critical to facilitating Commission inspections and examinations of municipal advisors and in evaluating a municipal advisor’s compliance with the applicable federal securities laws,” said Rebecca Olsen, Deputy Chief of the SEC’s Division of Enforcement Public Finance Abuse Unit.
Fines
According to the SEC press release, the following firms were charged and fined:
- Acacia Financial Group Inc. agreed to pay a civil penalty of $52,000;
- Caine Mitter and Associates Inc. agreed to pay a civil penalty of $94,000;
- cfX Inc. agreed to pay a civil penalty of $42,000;
- CSG Advisors Inc. agreed to pay a civil penalty of $40,000;
- Kaufman Hall & Associates LLC, together with Ponder & Company, agreed to pay a civil penalty of $324,000;
- Montague DeRose & Associates LLC agreed to pay a civil penalty of $40,000;
- PFM Financial Advisors LLC agreed to pay a civil penalty of $250,000;
- Phoenix Advisors LLC agreed to pay a civil penalty of $40,000;
- Public Resources Advisory Group Inc. agreed to pay a civil penalty of $184,000;
- Specialized Public Finance Inc. agreed to pay a civil penalty of $250,000; and
- Zions Public Finance Inc. agreed to pay a civil penalty of $47,000.
Rules violations
For recordkeeping failures, the firms were charged with violating:
- Section 17(a) of the Exchange Act and Rule 15Ba1-8 thereunder, and
- MSRB Rules G-8 and G-9.
For supervisory failures in preventing off-channel communications, firms were charged with violating:
- MSRB Rule G-44.
By violating the MSRB rules, the firms also violated 15B(c)(1) of the Exchange Act, which prohibits municipal advisors from providing advice, issuing securities, or undertaking solicitation in contravention of any rule of the MSRB.