WASHINGTON — The Securities and Exchange Commission's enforcement action against participants in the Greater Wenatchee, Wash., Regional Events Center Public Facilities District's arena deal shows that the commission will not shy from seeking financial penalties against municipal issuers and transaction participants, market participants said. It also underscores the potential pitfalls if the parties are determined to get a financing done despite some red flags or concerns, they said.
The SEC's settled administrative proceedings, announced Nov. 5, revolve around $41.77 million of bond anticipation notes the district issued in 2008 to finance the construction of an events center and ice hockey arena. The BANs defaulted in 2011 but the default was later cured and the BANs were refunded with refunding bonds secured by sales tax revenues. The district agreed to pay $20,000 — the first financial penalty the SEC has assessed against a municipal issuer, while underwriter Piper Jaffray & Co. and its lead investment banker on the deal, Jane Towery, agreed to be censured and pay penalties of $300,000 and $25,000, respectively to settle charges. Towery also agreed to a one-year ban on many business activities.