US - The State of New Jersey has settled charges by the Securities and Exchange Commission that it fraudulently misled municipal-bond investors while underfunding the state's two biggest pension plans.
The cease-and-desist order concerned documents for more than $26bn in bond offerings from 2001 to 2007 that the regulator said "created the false impression" that the Teachers' Pension and Annuity Fund and the Public Employees' Retirement System were adequately funded, masking the fact that the state couldn't make contributions without raising taxes or cutting services.
As a result, investors were not provided adequate information to evaluate the state's ability to fund the pensions or assess their impact on the state's financial condition, it added
"All issuers of municipal securities, including states, are obligated to provide investors with the information necessary to evaluate material risks," SEC enforcement director Robert Khuzami said.
"The State of New Jersey didn't give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation."
New Jersey is the first state ever charged by the SEC for violations of the federal securities laws. It agreed to settle the case without admitting or denying the SEC's findings and the regulator said it considered the state's co-operation and "certain remedial acts" in reaching the accord.
Elaine C. Greenberg, chief of the SEC's municipal securities and public pensions unit, added. "Issuers of municipal bonds must be held accountable when they seek to borrow the public's money using offering documents containing false and misleading information.
"New Jersey hid its financial challenges from the very people who are most concerned about the state's financial health when investing in its future."
Professional Pensions is looking to update its list of pensions master trusts in the UK ahead of authorisation. Can you help?
RPMI Railpen is in the next step in the journey towards achieving cost disclosure. Victoria Bell tells Stephanie Baxter about taking part in the Cost Transparency Initiative's pilot phase
Interserve's numerous defined benefit (DB) schemes have retained a sponsor link after the company entered into administration and was sold.
Chris Hannon has been named chairman of the Railways Pensions Trustee Company after a unanimous vote of approval from its board last week.