| When Chelsea’s treasurer-collector learned of a voluntary disclosure program at the Securities and Exchange Commission two years ago, he decided to review prior financial filings, and turned up some minor discrepancies.
On Wednesday, the SEC, which regulates Wall Street’s financial markets as well as municipal bond offerings, announced that Chelsea was among 71 governmental debt issuers subjected to enforcement actions.
The small city between East Boston and Everett faces no financial penalty and long ago implemented the reforms called for by the SEC sanction, according to Chelsea Treasurer/Collector Robert Boulrice.
“’Sanction’ is an awfully strong word,” Boulrice said. Despite a heading declaring it a “cease-and-desist order” that is “imposing remedial sanctions,” the actual enforcement in the SEC document appears relatively mild – which is by design.
“We encourage eligible parties to take advantage of the favorable terms we are offering under this initiative. Those who do not self-report and instead decide to take their chances can expect to face increased sanctions for violations,” SEC Enforcement Division Director Andrew Ceresney said in March 2014, announcing the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative.
The city’s treasurer for nine years, Boulrice said he learned of the voluntary disclosure program at a treasurer conference in June 2014, and heard the alternative – maintaining the discrepancy was immaterial – could put cities at great risk.
“Fines and then a whole lot of reporting and auditing – it just seemed to be extremely severe for missing a deadline,” Boulrice said. He said, “Upon the advice of bond counsel, I chose to self-disclose.”
In November 2014 Boulrice admitted that Chelsea had been late filing its annual financial report in 2010, and then subsequently neglected to disclose its prior late filing, he said. Boulrice said that less than a month later, the city had adopted reforms to prevent that from happening again.
“Some folks chose to wait and see if they got cited and then try to appeal that that’s really not material,” Boulrice said.
Chelsea was the only Massachusetts municipality included in the 71 enforcements actions announced Wednesday. Around the country, the states of Minnesota and Hawaii disclosed making similarly minor misstatements, as well as Fairfield, Connecticut and York, Maine.
Accuracy in financial reports is important as people who buy and sell municipal bonds can rely on them in making decisions.
In its announcement Wednesday, the SEC said it found that from 2011 to 2014, the “71 issuers and obligated persons sold municipal bonds using offering documents that contained materially false statements or omissions about their compliance with continuing disclosure obligations.”
“The diversity among the 71 entities in these actions demonstrates that continuing disclosure failures were a widespread and pervasive problem in the municipal bond market,” Andrew Ceresney, director of the SEC Enforcement Division, said in a statement. “The MCDC Initiative has brought attention to this important issue and resulted in increased compliance by municipal issuers and underwriters.”
