i.3.2 Legal Responsibilities of Issuers of Municipal Securities

i.3.2 Legal Responsibilities of Issuers of Municipal Securities

COMPLIANCE WITH SECURITIES LAWS – ANTI-FRAUD – In 2012, the SEC issued a report on the state of the public securities market recognizing its lack of transparency.11 The report highlighted the need for additional effort on the part of issuers to comply with existing securities laws to protect investors and the public. To ensure compliance, the SEC beginning in 2013 increased its surveillance of the market through the newly established Public Finance Abuse Unit. 

The Securities Act of 1933 Act (1933 Act) requires most issuers to register securities with the SEC and to submit to a pre issuance review of their offering document.12 Public agencies are generally exempt from the registration and reporting requirements to which corporate securities must adhere; however, they are subject to the anti fraud provisions contained in securities laws. Specifically, municipal issuers and officials (as well as other market participants) are subject to the federal anti fraud provisions contained in SEC Rule 10b-5 as adopted by the SEC under Section 10(b) of the Securities Exchange Act of 1934 (1934 Act) and Section 17(a)(1) of the 1933 Act.13 In addition, they are subject to the anti fraud and anti negligence provisions of Section 17(a)(2) and (3). Furthermore, the Securities Acts Amendments of 1975 (1975 Amendment) defines “person” as used in the 1934 Act to include government entities, thereby giving the SEC the affirmative authority to pursue state and local governments and their officials. See Chapter 6 – Securities Laws Pertaining to Municipal Debt.