Law and legal issues

CHICAGO - Michigan officials will take over the finances of Pontiac starting today following a state review board's determination that the troubled city was not taking adequate steps to address its "serious financial problems."

SAN FRANCISCO — Experts say a federal court ruling that may allow Vallejo, Calif., to escape its labor contracts could make bankruptcy a much more tempting option for municipalities and is likely to be upheld by higher courts.

WASHINGTON - The Investment Company Institute, which represents mutual funds and other investment companies, is pushing for a series of regulatory changes to make money market funds more liquid and transparent, as Obama administration advisers push for more sweeping changes to the industry.

BRADENTON, Fla. - Alabama Sen. Scott Beason is shepherding a bipartisan group of lawmakers hoping to move legislation forward that would resolve the financial crisis surrounding Jefferson County's troubled sewer system.

CHICAGO - After years of financial problems, Ohio's Forum Health this week filed for Chapter 11 bankruptcy, leaving uncertain how much bondholders would ultimately recover as the system moves through the reorganization process.

Congress should allow the Securities and Exchange Commission to set capital standards for large broker-dealer holding companies not affiliated with banks and to examine and obtain information about their affiliates, the director of the SEC's trading and markets division said yesterday.

SAN FRANCISCO - The Nevada Supreme Court will hear a case brought by opponents of the Las Vegas Redevelopment Agency who want to place a measure on the ballot that the city attorney has said could eviscerate the agency and its bondholders.

WASHINGTON - The Financial Industry Regulatory Authority fined Citigroup Global Markets $2 million yesterday for a series of multi-year trade reporting violations that included stocks, corporate debt, and more than 480,000 municipal transactions.

DALLAS - Wachovia Securities must repurchase all of the auction-rate securities sold in Texas by June and pay a $3.98 million fine under a final settlement order with state Securities Commissioner Denise Voigt Crawford.

Robert J. Bradbury, former chairman and chief executive officer of the now-defunct underwriting firm Dolphin & Bradbury Inc., pleaded guilty to one criminal count of securities fraud yesterday after selling four Pennsylvania school districts unsuitably risky notes to finance a failed golf course and causing them to lose more than $10 million.

WASHINGTON - House Financial Services Committee chairman Barney Frank is exploring the idea of including a provision in the expansive muni bill his staff is drafting that would require the federal regulation of financial or investment advisers in the municipal market that are not currently regulated, a senior committee staff member said yesterday.

BRADENTON, Fla. - Amid a federal corruption scandal related to bond financings in Palm Beach County, Fla., a local official is suggesting that underwriting firms be selected competitively as opposed to the long-held practice of commissioners selecting the firms that will sell the triple-A rated county's debt.

SAN FRANCISCO - U.S. Bankruptcy Court Judge Michael McManus said late Friday that Vallejo, Calif., can use Chapter 9 bankruptcy protection to reject its collective bargaining agreements.

BRADENTON, Fla. - Jefferson County, Ala. has been notified that JPMorgan and Bear Stearns & Co. terminated swaps related to the county's troubled sewer debt on March 3.

Securities and Exchange Commission chairman Mary Schapiro said yesterday that she plans to take a "deep dive" into municipal securities in the coming months.

CHICAGO - Credit analysts say they are closely monitoring the situation in Pontiac, Mich., as officials try to fend off an attempt by the state to take over the beleaguered city's finances.

Rep. Gerald Connolly said yesterday that he will introduce legislation during the next few weeks to provide some sort of federal support for municipal bonds, and that the chairman of the House Financial Services Committee has promised the panel will consider it.

WASHINGTON - The municipal market should no longer be overseen by a self-regulatory organization led by securities and bank dealers, Thomas Doe, chief executive officer of Municipal Market Advisors and a former MSRB board member, told a Senate panel yesterday.

BRADENTON, Fla. - Florida's Citizens Property Insurance Corp. yesterday received authorization to move forward with the sale of up to $2.5 billion of bonds.

WASHINGTON - Market participants are continuing to push for a federal backstop for the roughly $500 billion variable-rate demand obligation market, warning that the availability of already-scarce bank liquidity facilities will continue to decline if issuers experience downgrades to their credit ratings in the coming months.