Recently, the SEC settled with the City of Harrisburg (City) over violations of Rule 10b-5 in connection with material misstatements and omissions made by the City in its public statements and financial information, during a multi-year period.

This settlement underscores the increased focus by the SEC on state and municipal governments in connection with the trillion-dollar municipal bond market.

The SEC alleged that the City violated Rule 10b-5 as a result of its repeated failure to provide financial information and material events notices. As a result of the City’s failure, investors only had access to stale and misleading financial information. Further, the public statements that the City did provide omitted material information regarding the City’s declining financial condition and credit rating downgrades. As a result, investors and trading markets did not have material information regarding the City’s financial condition.