Fulton County is among 71 local governments across the nation that the federal Securities and Exchange Commission sanctioned for failing to issue timely updates on their financial condition to investors in their bonds.
The violations occurred several years ago and the county has settled by agreeing to update its disclosures and follow rules in the future.
A spokeswoman for Fulton County said the county voluntarily disclosed the violations in 2014 as part of of an SEC initiative and has taken steps to comply with the rules.
Much as companies are required to regularly update investors, government units that sell municipal bonds are required to file financial reports every year, and whenever a significant change in their financial condition occurs.
But in 45 states, the SEC said Wednesday, 71 government units and non-profits such as colleges and hospitals that issue bonds through local governments failed to update their reports. The local governments and non-profits then issued new bonds while falsely claiming that their financial disclosures were up to date, the SEC said.
Such “material misstatements and omissions” violated federal securities laws and deprived investors of timely information on the borrowers’ ability to pay their debts, the agency said.
The SEC said it offered “favorable settlement terms” to the bond issuers because they self-reported the alleged violations.
Under its settlement with the SEC, Fulton didn't admit or deny the allegations. But the county agreed to update its disclosures and comply with the requirements in the future, and to disclose the SEC's sanction in future filings for five years.
In its cease-and-desist order against Fulton County, the SEC said the county made misleading statements when it issued bonds in 2011. The SEC said Fulton County claimed in bond documents that it had complied with disclosure requirements, other than missing a deadline in 2009 to file its annual financial report “due to the inability of one if its component units to produce its audited financial statements” on time.
But in fact, the SEC said, the county missed the disclosure deadlines in three out of four years from 2006 to 2009. The county “knew or should have known that this statement was untrue,” the SEC said.
—Staff reporter Arielle Kass contributed to this report.
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