Elisse Walter, the new chair of the Securities and Exchange Commission (SEC), is putting a focus on municipal bonds and pricing transparency in the municipal securities market. Walter previously served as SEC commissioner for four years heading efforts to examine municipal securities when the SEC released a report proposing regulatory and legislative reforms.
While municipal bonds have generally been seen as safe investments, more recently, they are becoming riskier, as municipalities continue to face budget challenges, and more complex as Wall Street involves derivatives.
The City of Orlando and Orlando Mayor Buddy Dyer have relied heavily on issuing municipal bonds for all of Dyer’s major development and venues projects. Also, pensions for police, fire and city employees are also invested in the municipal bonds which could jeopardize them in the future. This new focus on municipal securities could spell trouble for Mayor Dyer.
“You have to look at what each party is doing. When the municipality exaggerates their revenue forecast, they’re possibly liable. When someone says something is absolutely safe and they misrepresent the type of bond, then you could sue the issuer,” said Oliver Pursche, president of Gary Goldberg Financial Services, who has worked in the securities industry for more than 20 years.
To begin the New Year, the SEC issued an investor bulletin to educate investors about assessing credit risks they face when purchasing municipal bonds.
Read more on how the New SEC Chair May Focus on Municipal Securities.
[…] There are many reasons for concern about the city’s financial standing and credit ratings. The new Amway Center went over budget, costing taxpayers more than half a billion dollars; the new Performing Arts Center has seen shaky fundraising and “phase 2” is not likely going to happen anytime soon; and Dyer recently had to secure county financial support to move forward with the expected $500 million Citrus Bowl renovations because the city’s credit was “maxed out.” The city of Orlando was also forced to dip into its reserves to plug budget holes this year. There are also new reports that the SEC will increase scrutiny of municipal securities. […]