Much has been written about Municipal Bond Insurance. That includes posts here and especially under the category of Bond Insurance which address the need for enforcement of duties of Good Faith and Fair Dealing in this arena.
Now comes news that "fair-dealing rules" have been in place "for decades" in the municipal bond market. "Rules requiring fairness in this market state that participants must not be deceptive, dishonest or unfair in their practices. The regulations apply to the sale of municipal bonds to investors and to underwriters' interactions with issuers; fraud need not be alleged in a fair-dealing case." Gretchen Morgenson, "Fair Game / Police Protection, Please, for Municipal Bonds" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 5, 2012).
From recent news coverage it is clear that at least certain firms and individuals who make their money from Wall Street, have taken advantage of relatively less financially sophisticated school board members or water management district board members, for example. Even so, the Securities and Exchange Commission seems to be overloaded with George W. Bush-era political appointees who still see their mission as doing nothing so that others can accuse the Federal Government of not acting. The SEC has recently asked for more power to enforce regulations in the municipal bond market while ignoring the regulations that have existed for almost as long as the SEC itself. This is perhaps an exaggeration, but only a slight one.
This is an area deserving of research. "So far, the commission's reticence to act on behalf of municipal issuers has left those issuers to take on Wall Street alone. Few have done so." Gretchen Morgenson, "Fair Game / Police Protection, Please, for Municipal Bonds" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 5, 2012).
There does not seem to be a similar impediment to lawsuits involving allegedly failed advice to munis when they are investors rather than issuers. The City of St. Petersburg is one example. The City successfully sued for over $10 Million in a case involving alleged failure or unfair dealing in financial advice to the City on an investment. See "Bad Faith Financial Services: No Comparative Negligence in Lawsuit," posted on April 5, 2012.
This area is worth taking time to research the law so that the law may be applied.
It is worth your time, too.
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