SEC Considers GIC Charges Against GE Unit

The Securities and Exchange Commission's enforcement staff last week notified GE Funding Capital Market Services Inc. that it is considering recommending the filing of charges against the unit and/or former employees in connection with the bidding of municipal bond-related guaranteed investment contracts.

General Electric Co. made the disclosure in the Form 10-Q that it filed with the SEC.

"GE FCMS received a 'Wells notice' advising that the SEC staff is considering recommending that the SEC bring a civil injunctive action or institute an administrative proceeding in connection with the bidding for various financial instruments associated with municipal securities by certain former employees of GE FCMS," GE stated in the 10-Q.

"GE FCMS is one of several industry participants that received Wells notices during 2008 [and] understands that it will have an opportunity to respond to the Wells notice and to discuss the matter with the staff before any recommendation is made to the commission," the company stated.

A spokesman for GE would not comment but sources said the Wells notice likely revolves around the GIC business done by FGIC Capital Markets Services, which GE retained when it sold Financial Guaranty Insurance Corp. in 2003.

The SEC has been conducting a civil investigation of alleged bid-rigging and anticompetitive activities associated with GICs and derivatives contracts since November 2006. The investigation is parallel to a criminal antitrust probe of such activities that is being conducted by the Justice Department.

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