Thursday, July 7, 2011

SEC Press Release: Fraudulent Bidding Practices

SEC Charges J. P. Morgan Securities with Fraudulent Bidding Practices Involving Investment of Municipal Bond Proceeds

The U.S. Securities and Exchange Commission (SEC) issued a press release today announcing that it has
charged J.P. Morgan Securities LLC (JPMS) with fraudulently rigging at least 93 municipal bond reinvestment transactions in 31 states, generating millions of dollars in ill-gotten gains.
Here are the SEC Complaint, SEC Final Judgment and the Litigation Release No. 22031.

Charges against brokerage firms for rigging the competitive bidding process of reinvestment products have continued over the past 8 months. This is at least the third instance in which a brokerage firm has been charged for rigging. Previous charges were made against Banc of America Securities and UBS who with their affiliates were charged over $136 million and $160 million respectively.

Profitable, fraudulent activity in the market is contagious when it works and when there is a lack of regulation and oversight.

Municipal bonds are bonds issued by government entities at the city, county and state levels. Municipalities issue bonds to finance their projects for the public good. These bonds are called municipal bonds, and their rates may be fixed or floating. They are usually long term bonds. Municipalities usually use the proceeds of the bonds to purchase reinvestment products before using them for the municipalities’ intended purpose.

SLCG has written several papers relating to municipal bonds:
Investors may find in our dedicated website many other interesting papers and notes.

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