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Public Finance Alert- NY/NJ Port Authority Agrees to Settlement with SEC for Disclosure Omission
By Jeffrey D. Winitsky on January 11, 2017

On January 10, 2017, the Securities and Exchange Commission ("SEC") announced that the Port Authority of New York and New Jersey ("Port Authority") agreed to admit wrongdoing and pay a $400,000 penalty to settle charges related to the failure of the Port Authority to disclose to investors certain risks associated with road projects undertaken and financed by the Authority in violation of the Securities and Exchange Act of 1933 ("Securities Act of 1933"). 

On January 10, 2017, the Securities and Exchange Commission ("SEC") announced that the Port Authority of New York and New Jersey ("Port Authority") agreed to admit wrongdoing and pay a $400,000 penalty to settle charges related to the failure of the Port Authority to disclose to investors certain risks associated with road projects undertaken and financed by the Authority in violation of the Securities and Exchange Act of 1933 ("Securities Act of 1933"). 

In particular, the SEC's order found that the Port Authority offered and sold $2.3 billion worth of bonds to investors despite internal disagreement as to whether certain capital projects funded, in part, by such bonds (including the Pulaski Skyway in Northern New Jersey) could, in fact, be permissibly undertaken or funded under the Port Authority's own authorizing legislation and bond documents.  Specifically, the SEC order found that the Port Authority failed to disclose to investors the risks associated with the basic permissibility of the Port Authority to undertake or fund the projects described in the offering documents distributed to investors.  In doing so, the SEC order found that the Port Authority violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.

In a statement provided by the SEC immediately following the release of the SEC order, Andrew M. Calamari, Director of the SEC's New York Regional Office, indicated that "[T]he Port Authority represented to investors that it was authorized to issue bonds while not disclosing significant known risks that its actions were not legally permitted."  Director Calamari went on to say that "[M]unicipal bond issuers must ensure that their disclosures are complete and accurate so that investors can make fully informed decisions about whether to invest."

Noteworthy of the settlement is the fact that the Port Authority is the first municipal issuer to admit wrongdoing in any SEC enforcement action.

The enforcement of this matter by the SEC, including the financial penalty paid and admission of wrongdoing by the Port Authority, underscores the importance of having a thorough understanding of and a plan for strict compliance with the applicable securities rules and regulations to ensure appropriate disclosure to investors in any municipal securities offering.

The attorneys at Parker McCay P.A. can be reached at any time in order to discuss the details of the SEC order and to discuss the application of securities rules and regulations related to appropriate disclosure in municipal securities offerings.

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