The Securities and Exchange Commission said that the city of Allen Park, Mich., and two of its former officials settled fraud charges related to the sale of a $31 million municipal bond issue to raise funds for a movie studio project to spur needed economic development, the Wall Street Journal reported today. The SEC and other regulators have been moving to protect the small investors who make up the bulk of the $3.7 trillion municipal-bond market, which the SEC described in a 2012 report as “illiquid and opaque.” That has included fining Kansas, New Jersey and Illinois for failing to disclose that underfunded pension obligations posed a risk to the repayment of some bonds. The states settled without paying a penalty or admitting wrongdoing. This week, the SEC fined 13 brokerage firms for improperly selling junk-rated Puerto Rico bonds in increments below $100,000, the agency’s first action under a rule designed to protect mom-and-pop investors from high-risk debt. The firms didn’t admit or deny the SEC’s findings and agreed to pay fines between $130,000 and $54,000. Andrew J. Ceresney, director of the SEC’s enforcement division, said in a news release Thursday, “Allen Park solicited investors with an unrealistic and untruthful pitch, and used outdated budget information in offering documents to avoid revealing its budget deficit.”
