Port Authority of NY and NJ Agree to $400K SEC Settlement for Not Disclosing Bond Risks

By:
Chris Gaetano
Published Date:
Jan 10, 2017
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The Port Authority of New York and New Jersey had admitted fault and agreed to a $400,000 settlement with the Securities and Exchange Commission over accusations that it did not properly warn investors funding a series of roadway projects of the risks that came with the bonds. It is the first municipal issuer to admit wrongdoing in an SEC enforcement action. 

The SEC said that the Port Authority sold $2.3 billion worth of bonds to fund projects concerning the Route 1&9 Pulaski Skyway, the Hoboken and Conrail Viaducts of Route 139, the Route 7 Hackensack River Bridge and the Route 1&9 New Road Project. At the same time, however, the Port Authority was having internal discussions over whether it even had the legal authority to pursue some of these projects. One internal memo said that there was no clear path to legislative authority to undertake such projects, while another said there is a risk of a successful challenge by bondholders and investors in connection with the projects. 

The SEC said the Port Authority failed to mention any of these risks in its offering document, however. In fact, it stated explicitly that the bonds were only for purposes for which the Port Authority is authorized by law to issue bonds. 

“The Port Authority represented to investors that it was authorized to issue bonds while not disclosing significant known risks that its actions were not legally permitted,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Municipal bond issuers must ensure that their disclosures are complete and accurate so that investors can make fully informed decisions about whether to invest.”

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