SEC Accuses the State of Illinois of Securities Fraud

Yes, you read that title correctly. The NYT is reporting:

From 2005 to 2009, Illinois issued $2.2 billion worth of municipal bonds, which the S.E.C. said were marketed under false pretenses. There was a growing hole in the pension system, putting increasing pressure on the state’s finances every year. That raised the risk that at some point retirees and bond buyers would be competing for the same limited money. The risk grew greater every year, the S.E.C. said, but investors could not see it by looking at Illinois’ disclosures.

In effect, that meant investors overpaid for bonds of a lower quality than they were made out to have, although the S.E.C. did not measure any loss. In Monday’s settlement with the S.E.C., Illinois agreed to a cease-and-desist order without admitting or denying the accusations.


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