12/08/2010 03:49:00 PM EST
SEC Reaches $137M Settlement with Bank of America Subsidiary in Municipal Bond Investigation
WASHINGTON, D.C. - (Mealey's) A former subsidiary of Bank
of America Corp. that is now part of Merrill Lynch, Pierce, Fenner and Smith
LLP agreed on Dec. 7 to a $137 million settlement of a Securities and Exchange
Commission investigation into allegations of bid rigging during the investment
of proceeds of municipal bonds (In the Matter of Banc of America Securities
LLC, File No. 3-14153, SEC).
According to a press release, which can be found on the
SEC's website at http://www.sec.gov/news/press/2010/2010-239.htm,
Banc of America Securities LLC has agreed to pay more than $36 million in
disgorgement and interest, as well as $101 million "to other federal and state
authorities for its conduct."
The settlement comes on the heels of a cease-and-desist
order also issued yesterday by the SEC, where the SEC found that "the bidding
process was not competitive because it was tainted by undisclosed
consultations, agreements, or payments and, therefore, could not be used to
establish the fair market value of the reinvestment instruments. As a
result, these improper bidding practices affected the prices of the
reinvestment products and jeopardized the tax-exempt status of the underlying
municipal securities, the principal amounts of which totaled billions of
Banc of America Securities, without admitting or denying
guilt with regard to the SEC's findings, agreed to censure, requiring Banc of
America Securities to cease and desist from "committing or causing any
violations and any future violations of Section 15(c)(1)(A) of the Securities
Exchange Act of 1934." It also must pay disgorgement and prejudgment
interest in the amount of $36,096,442 "directly to the affected entities."
The SEC said it began investigating Banc of America
Securities' role "in certain improper bidding practices that occurred, from at
least 1998 through 2002, involving the temporary investment of proceeds of
tax-exempt municipal securities in reinvestment products, such as guaranteed
investment contracts, repurchase agreements, and forward purchase agreements."
"[T]hese practices affected the prices of the reinvestment
products and jeopardized the tax-exempt status of the underlying municipal
securities," the SEC said.
Moreover, according to the SEC's press release, the SEC
barred former Banc of America Securities officer Douglas Lee Campbell from
"association with any broker, dealer or investment adviser, based upon his
guilty plea to a criminal information on Sept. 9, 2010, in United States v.
Douglas Lee Campbell (Criminal Action No. 10-cr-803) charging him with two
counts of conspiracy and one count of wire fraud."
Campbell was charged with engaging in "fraudulent
misconduct in connection with the competitive bidding process involving the
investment of proceeds of tax-exempt municipal bonds." No civil penalty
was imposed by the SEC against Campbell.
[Editor's Note: Full coverage will be in the
January issue. In the meantime, the SEC's order against Banc of America
Securities is available at www.mealeysonline.com
or by calling the Customer Support Department at 1-800-833-9844.
Document #57-110111-010R. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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