![handle is hein.journals/stlolane11 and id is 1 raw text is: uN Section of State and Local Government Law
STATE &
LOCAL LAW
The Section serves as a colegialforum for its members, the profession and thepublic to provide leadersbip and educational resources in
urban, state and local government law andpolicy.
The SEC Sends a Message to Miami
By David G. Tucker
Let me ask you this, does anybody read this [official state-
ment]? I mean, only experts read this ... [M]ost people
don't read this, nobody reads this. They go by what the
raters, that is Moody's, Standard and Poor's, saying that
these bonds are safe to buy. By rating them AAA, they're a
very good buy. Therefore, they wouldn't go reading through
this. Nobody does.
Testimony offormer City Manager, City of Miami, Florida
n difficult economic times for local governments, oversight
by elected officials and staff generalists is especially impor-
tant. Some of the most significant enforcement cases pros-
ecuted by the Securities and Exchange Commission (SEC)
against local governments that issued bonds originated in de-
cisions made during economic downturns or other periods
when the affected local governments experienced fiscal dif-
ficulties. As states and local governments again wrestle with
such difficulties, they may well be tempted by a short-term
solution that will ultimately cost them and their governmen-
tal unit much more in the long haul.
On March 21,2003, the SEC issued a cease-and-desist
order against the City of Miami, Florida, in which the city
was ordered to cease and desist committing or causing any
violation or future violation of the antifraud provisions of the
federal securities laws. City of Miami, Florida, Securities
Act of 1933 Rel. No. 33-8213, Mar. 21,2003. On the one
hand, this decision flowed logically from the SEC's emphasis
on enforcing the antifraud provisions of federal securities
laws against local governments throughout the 1990s; on the
other hand, this decision starkly rejected the city's defense
David G. Tucker is of Counsel with
Miller, Canfield, Paddock and Stone,
PL. C. in Miami, Florida.
that it relied on its staff and its financial professionals in
preparing its disclosures. Members of governing bodies of
local governments that issue bonds must assure that the fi-
nancing documents that are used to sell the bonds do not
contain misleading information.
The SEC's action in March against the City of Miami
was not its first foray into the field of municipal securities.
As early as March 1994, the SEC issued its Interpretive
Guidance on the Antifraud Provisions, SEC Rel. No.
33-7049, Mar. 9,1994, in which the SEC discussed its views
on the applicability of the antifraud provisions of federal se-
curities laws to the different players in the municipal bond
marketplace. The antifraud provisions prohibit any person,
including issuers of municipal bonds, from making a false or
misleading statement of material fact or omitting any mater-
ial facts necessary to make statements made by that person
not misleading. Id.
The SEC noted that the test of whether a fact must be
disclosed is whether disclosure of the omitted fact would have
been viewed by the reasonable investor as having significant-
ly altered the total mix of information made available. Id.
The SEC also discussed requirements for disclosing accu-
rate information about the financial conditions-including
continued on page 14
SChair' Message, by Patricia E. Salkin, page 2
Section News, page 3
-Homeland Security Resolution Passes ABA House
-Fordham Awards Announced
-Local Government's Role in the Law of the
World Congress
Environmental Update: EPA's New Windfall Lien
Guidance, page 7
Recent Developments, page 9
Supreme Court Watch, page 11
Vol. 27, No. 1, Fall 2003](ViewImageLocal?handle=hein.journals/stlolane11&div=1&collection=&method=preview&ext=.png&size=3)
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