Regulatory double standards gall me.

I represent brokers in regulatory matters.  It always amazes me at the lengths to which a regulator might go to get a result that could be spun in their favor.  I have also dealt with reasonable regulators who take all the facts into consideration before making a decision that could affect an individual’s career and family.

The SEC just released news about a settlement with a city in Michigan that did something laughably awful.

First, these geniuses decided, in late 2008 as the economy is swirling the bowl, to build a “movie studio project.”  First, I was thinking this is going to be about porn, but I was wrong.  It’s about stupidity.

Then, the geniuses decided that their idea was so good that members of the general public would surely want to get in on financing it.  So they floated bond issues.  The “float” analogy will pay off later.

Finally, they decided that they should put up a vocational school worth significantly less than the $146 million dollar pie-in-the-sky movie studio.  By the way, the city is Allen Park, Michigan, a southwest suburb of Detroit.  It’s here –

So instead of a movie studio, this town got a school. They issued two tranches of bonds, the second of which was in June 2010. The project collapsed two months later. Oh, and the debt service was 10% of the city’s budget, which they didn’t bother to mention in their financials, or at least they left out the effect of the debt service on the city.

So the City paid a $10,000 fine and said they won’t lie again. The two city officials said they won’t lie again and won’t do municipal bond offerings again, either. Wow, they must feel really terrible. No more muni bond deals. Just awful.

In the meantime, a broker who bends a rule to facilitate a customer’s wishes, with the customer’s full knowledge, can lose his or her license and livelihood. No lies. No busted bond issue. One bent rule.

Where is the equity?

That’s the view of one grumpy lawyer in Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

Print Friendly, PDF & Email