Investors Should Be Cautious About Buying Muni Bonds
Muni-bond headlines posted across the nation over the past eighteen months
or so have all boiled down to this: Investors need to be very cautious
when considering investing in municipal bonds. Two recent SEC cases provide
stark examples of this.
In April, the
SEC charged the City of Victorville, Calif. and others with defrauding investors by selling municipal bonds based
on inflated property valuations.
According to the complaint, “the inflated figure allowed the Airport
Authority to issue substantially more bonds and raise more money than
it otherwise would have. It also meant that investors were given
false information about the value of the security available to repay them.”
This month, the SEC accused the City of Harrisburg, Penn. of making false
statements to investors.
According to the complaint, the City of Harrisburg, Penn. failed to submit
annual financial information or audited financial statements to the proper
authorities after January 2009.
"Because of Harrisburg's
misrepresentations, secondary market investors made trading decisions based on inaccurate
and stale information," said Elaine C. Greenberg, Chief of the SEC's
Enforcement Division's Municipal Securities and Public Pensions Unit.
Both cities’ allegedly fraudulent behavior affected millions of dollars
worth of municipal bonds. In the case of Harrisburg, the city’s
alleged misrepresentations and lack of disclosure affected investors holding
hundreds of millions of dollars in bonds issued or guaranteed by the city.
In December of 2012, the SEC said that
assessing municipal bond credit risk could help investors protect themselves from loss in the muni bond market.
However, these recent cases against Victorville and Harrisburg indicate
that credit risk isn’t the only issue affecting municipal bond investors.
Investors interested in purchasing such bonds would be wise to proceed
with great caution.
About our law firm:
Meyer Wilson represents individuals across the country who have been harmed
by investment fraud. All of our cases are handled on a contingency fee
basis and we never request a retainer of any kind. Contact us toll-free
at 888-390-6491 for more information or complete the online form on the
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