WASHINGTON, March 10 (Reuters) - Federal regulators on Monday said U.S. municipal issuers and underwriters who self-report inaccurate statements they have made in bond documents will likely receive standardized, favorable settlement terms under a new initiative.
"We encourage eligible parties to take advantage of the favorable terms we are offering under this initiative," Andrew Ceresney, director of the Securities and Exchange Commission's Enforcement Division, said in a statement. "Those who do not self-report and instead decide to take their chances can expect to face increased sanctions for violations."
Under the initiative an issuer such as a city or an underwriter could come forward to say it had put wrong information in continuing disclosures, or failed to include important information about its financial condition and operations.
When issuers sell new bonds, they are supposed to describe in sale documents any instances within the previous five years when they did not comply with federal requirements to give material information to investors. Underwriters are supposed to ensure that they follow through.
The Tower Amendment, which prevents the SEC from requiring issuers to file bond sale documents with it before bringing the securities to market, limits the SEC's ability to enforce securities law in the $3.7 trillion U.S. municipal bond market.
But it can rap underwriters and issuers for committing fraud in their bond documents.
In the last year and a half, the commission has ramped up its efforts and charged cities, school districts and even a state for not disclosing important information.
"Continuing disclosures are a critical source of information for investors in municipal securities, and offering documents should accurately disclose issuers' prior compliance with their disclosure obligations," LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division's Municipal Securities and Public Pensions Unit, said in the same statement.