SEC Sanctions San Diego

by Glen Shapiro, LawAndTax-News.com, New York

16 November 2006

The US Securities and Exchange Commission on Tuesday entered an order sanctioning the City of San Diego for committing securities fraud by failing to disclose to the investing public important information about its pension and retiree health care obligations in the sale of its municipal bonds in 2002 and 2003.

To settle the action, the city agreed to cease and desist from future securities fraud violations and to retain an independent consultant for three years to foster compliance with its disclosure obligations under the federal securities laws.

Linda Chatman Thomsen, the Director of the SEC's Enforcement Division, explained that:

"American investors trust municipal bonds as they do few other investments. With over $2.2 trillion in municipal securities outstanding - two-thirds of which are held by individual investors - municipal bonds are a vitally important segment of our nation's securities markets. This action signifies our resolve to hold state and local governments accountable when they commit fraud while seeking to borrow the public's money."

In accepting the city's offer to settle the matter, the Commission considered various remedial measures that the city has already taken to detect and prevent future securities law violations, as well as the city's agreement to retain an independent consultant.

The city consented to the issuance of the Order without admitting or denying the findings.

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