WASHINGTON, D.C. - (Mealey's) The Securities and Exchange
Commission and the City of Harrisburg, Pa., have agreed to a cease-and-desist
order preventing the city from continuing its violation of federal securities
laws in connection with statements it made both publicly and in financial documents
regarding the city's failure to comply "with written undertakings executed by
the City in the form of Continuing Disclosure Certificates," the SEC said in
its order, filed May 6 (In the Matter of the City of Harrisburg,
Pennsylvania, No. 3-15316, SEC).
The SEC alleges that the city violated Section 10(b) of
the Securities Exchange Act of 1934 and SEC Rule 10b-5 by issuing the false and
misleading statements in the continuing disclosure certificates.
"[The written] undertakings were a prerequisite to the
underwriting of primary offerings of municipal securities subject to Rule
15c2-12 of the Exchange Act. Pursuant to the Continuing Disclosure
Certificates, the City agreed to provide certain ongoing financial information
and notices for the benefit of bondholders. Harrisburg is a near-bankrupt
city under state receivership largely by virtue of approximately $260 million
in outstanding debt it guaranteed for upgrades and repairs to a municipal
Resource Recovery Facility ('RRF'), owned by The Harrisburg Authority. As
of March 15, 2013, Harrisburg
has found it necessary, on three occasions, to withhold approximately $13.9
million in general obligation debt service payments in order to have sufficient
cash flow to meet essential services in the City," the SEC said.
Terms Of The Order
Under the terms of the order, the city has undertaken a
number of steps to enhance its disclosure process, including "instituting
formal written policies and procedures with respect to public statements
regarding financial information made by the City and its compliance with its
Continuing Disclosure Certificates."
"In addition, Harrisburg
has implemented annual training for City employees involved in the disclosure
process to ensure compliance with the Disclosure Policy and to provide an
overview of the City's obligations under the federal securities laws.
This annual training will be conducted by the City's Business
Administrator. City employees receiving the training will provide written
certification that they have completed the training and have reviewed,
understood and will comply with the Disclosure Policy. No later than 14
days after the end of each fiscal year, the Business Administrator must certify
that he has conducted the annual training," the SEC stated.
has also committed to submitting a copy of its Disclosure Policy, together with
any amendments, on EMMA [the Electronic Municipal Market Access] and placing it
on the City's public website. In addition, any securities offering for
which the City is an issuer or obligated person will now also include a
certification by the Business Administrator that the information set forth
therein regarding the City does not contain any untrue statement of material
fact or omit to state any material fact necessary to make the information
contained in the offering document not misleading. Finally, Harrisburg has agreed to
disclose the terms of this Order on EMMA and in the preliminary and final
offering documents of any future securities offerings for which the City is an
issuer or obligated person within five years from the date of this Order."
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