A pair of enforcement actions brought by the Securities and Exchange Commission over the past few days highlights a focus on punishing and preventing unregistered municipal advisory activity, something the SEC and its officials have said it is closely monitoring.
In separate and unrelated settled administrative proceedings, the SEC charged two entities with violating federal securities laws by providing advice with respect to municipal bonds without having properly registered as municipal advisors. Both entities agreed to pay civil monetary penalties to settle the charges without either admitting or denying the SEC's findings.
In a case settled May 30, the SEC charged Vancouver, Canada-based Agentis Capital Advisors General Partnership (previously known as Agentis Capital Advisors) with providing advice related to some $1.9 billion of municipal securities issuances to six conduit borrower and obligated person clients between December 2020 and February 2023, when the firm was not a registered municipal advisor with SEC and Municipal Securities Rulemaking Board. An SEC summary of the action states that the issuances were related to public-private partnerships, and the firm's website highlights infrastructure finance as part of its core expertise.
Section 15B(a)(1)(B) of the Securities Exchange Act makes it unlawful for "a municipal advisor to provide advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities" without being registered under the SEC's municipal advisor rules.
This regulatory regime was created by the
"Agentis' municipal advisory activities for its clients included: (a) providing detailed information and analysis of debt financing structuring options in complex financial models, including the sale of municipal securities; (b) providing advice on the structure, timing, and terms of the municipal securities offerings; (c) coordinating the credit rating process; and (d) soliciting and selecting other parties to the financing, including underwriters," the SEC found.
Agentis, which is now
Muni advisory activity in the P3 space was the subject of public comments by SEC muni office chief Dave Sanchez
"P3 consultants and private sector partners who advise municipal entities or obligated persons on the issuance of municipal securities, the use of municipal financial products, and/or the use of debt financing alternatives that are tailored to the specific needs, objectives, or circumstances of the municipal entity during any stage of the P3 lifecycle should remember that they may be engaging in municipal advisory activity requiring registration as a municipal advisor with the commission and the MSRB," Sanchez said in prepared comments.
In another administrative proceeding announced June 2, the SEC charged Utah-based Highmark School Development, LLC with acting as an unregistered muni advisor when it provided advice in connection with five municipal securities issuances for five charter schools between September 2019 and April 2023.
"The advice that Highmark provided to the charter schools included: (a) advising on the development of financing plan that included the issuance of municipal securities; (b) advising on the structure (typically fixed rate with capitalized interest period during construction), timing (to coordinate with acquisition of property and/or commencement of construction), and terms of the offerings; (c) advising on current municipal bond tax-exempt interest rates based on its analysis of comparable charter school bond deals; and (d) advising on the schools' abilities to finance and/or refinance their facilities through the issuance of municipal securities given each school's student enrollment forecast and revenue projections based on anticipated per-pupil payments and the municipal securities terms," the SEC found.
The SEC further found that Highmark interacted with other members of the deal team and with potential investors on behalf of its character school clients. The SEC "considered Highmark's prompt cooperation with the staff's investigation," when considering the settlement, according to the administrative order.
Highmark has to date not registered as a municipal advisor, according to MSRB records.
Highmark agreed to pay a penalty of $40,000 to settle the SEC's charges, as well as to cease and desist from further violations of the securities laws. Further, the firm agreed to provide a copy of the administrative order to all its charter school clients and to new clients for a period of 12 months. If Highmark registers as a municipal advisor with the Commission and the MSRB before the 30-day period for notice to existing charter school clients, it shall not be required to provide a copy of the order to either existing or new charter school clients. If Highmark registers before the expiration of the 12-month notice period, it will not be required to provide a copy of the order to new charter school clients after the effective date of the registration.
Highmark did not respond to a request for comment.
The charter school sector has been a focus for the SEC, which has charged similar cases in recent months. In August 2024
In November 2024 the SEC charged Level Field Charter Partners, LLC and one its partners, David Endom, with failing to register as a muni advisor when it provided advice to four charter schools in connection with six bond offerings.
