Elaine Greenberg Examines the SEC’s Municipal Bond Charges Against Edward Jones

The Wall Street Journal, The Bond Buyer, Law360 | August.13.2015

Elaine Greenberg, a partner in the Securities, Litigation, Investigations and Enforcement practice at Orrick, was recently quoted in numerous publications, including The Wall Street Journal, The Bond Buyer and Law360, on Edward Jones’ $20 million settlement with the Securities and Exchange Commission over municipal bond charges. 

The SEC charged the St. Louis-based brokerage firm with selling municipal bonds to customers at inflated prices, costing customers at least $4.6 million. Edward Jones settled without admitting or denying the SEC’s findings. This is the first time the SEC has charged an underwriter with pricing violations in connection with primary offerings of municipal bonds. The SEC also charged the firm with failing to establish an adequate supervisory system to determine whether the dealer markups it charged on certain secondary market transactions were reasonable.

Elaine, who previously served as the head of the SEC’s municipal securities and public pension unit, explained to The Wall Street Journal that the spotlight on this case sends a signal to municipal market participants that the SEC is on the lookout for violations of securities laws or MSRB regulations in both the primary and secondary markets. "They're really looking at all aspects of the market, whether it's disclosure, market structure or pricing," she said.

In an interview with The Bond Buyer, Elaine noted that the SEC’s order is essentially “putting other firms on notice,” and if it finds violations similar to those found in this case, the SEC “will likely pursue enforcement actions.”

After the case was announced, four SEC commissioners banded together and issued a separate statement calling for the completion of clear rules requiring dealers to disclose markups and markdowns on municipal securities trades. In Law360, Elaine again referred to this action as an “alert” to the market that the SEC is “very much focused on these pricing issues.”