“This marks the first time that the SEC has charged a municipality for misleading statements made outside of its securities disclosure documents.” ~The Securities and Exchange Commission

On Monday, May 6th, the Securities and Exchange Commission (SEC) released charges and an Order against the City of Harrisburg for presenting “misleading information” during it’s developing financial crisis as well as for having outdated and incomplete data available to investors.

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Read

  • The SEC press release here.
  • The Report of Investigation here.
  • The Order here.

The Violations

“Harrisburg made material misrepresentations and omissions in its 2007 and 2008 CAFRs, 2009 Budget and Transmittal Letter, 2009 State of the City Address and its Mid-Year Fiscal Report for 2009, regarding Harrisburg’s credit ratings and the potential impact of the RRF debt on the City’s financial health. As a result of this reckless conduct, Harrisburg violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.” (page 12 of the Order)

The Remedy

There are no fines levied against the City of Harrisburg. Rather the City has agreed to:

  • Institute appropriate policies and procedures to assure the timely presentation of financial information, i.e complete audits and accurate disclosures
  • Implement annual training for employees who are involved in the process of disclosing financial information to the public
  • Will publicly display the its Financial Disclosure Policy and the SEC Order
  • “Shall cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder”
      • Section 10(b)=”prohibit misrepresentations or omissions of material fact in connection with the purchase or sale of any security. This provision prohibits the making of any untrue statement of material fact or omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the purchase or sale of securities.”

Statement released from Mayor Linda Thompson

“Today marks a turning point in the City’s financial history. I have signed, and the United States Securities and Exchange Commission has accepted, the City’s Offer of Settlement in connection with the SEC’s investigation of the City’s financial disclosure process. This resolves the SEC’s investigation of the City without a lawsuit in the courts.

My administration cooperated fully with the SEC’s investigation, which has now concluded without any monetary sanctions being assessed against the City. The City has completely revamped its policies and procedures for financial disclosures. These new policies and procedures are designed to ensure that accurate and complete financial information regarding the City’s finances is made available to investors and the public in a timely manner. As your Mayor, I am committed to making sure this happens.

As a condition of the settlement with the SEC, and as specifically required by section 202.5(e) of Title 17 of the Code of Federal Regulations, I am prohibited by law from discussing this matter further in any public statement.”

Tara Leo Auchey

Tara Leo Auchey

Tara Leo Auchey

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