Following its announcement in August that it had entered into settlements with over seventy municipal issuers in connection with the Municipalities Continuing Disclosure Cooperation (MCDC) initiative, there was speculation as to whether additional settlements would be announced, or if this first round of settlements represented all of the enforcement actions against municipal issuers that would come from MCDC.

It now appears that the SEC has elected to formally close the book on the MCDC Initiative. LeeAnn Gaunt, the chief of the SEC enforcement division’s public finance abuse unit, recently indicated that the SEC would not bring any additional settlements under MCDC. However, Gaunt also issued a warning: the SEC had begun looking at those underwriters and issuers that chose not to participate in the initiative despite committing violations.

From The Bond Buyer:

“We currently do not expect to recommend enforcement action against any additional parties under the initiative,” [Gaunt] said. “We now think it is appropriate to turn our attention to issuers and underwriters and obligors that didn’t participate.”

The unit’s enforcement lawyers view the underwriters and issuers who may have committed violations but did not self-report as part of MCDC as a high risk for future violations, Gaunt said, adding, “That is a group of particular interest to us and we intend to devote significant resources to identifying violations by those parties.”

Which underwriters and issuers could the SEC go after next? Obvious low-hanging fruit would be those underwriters and issuers that chose not to participate despite their counterpart doing so.

There is also the question of how aggressive the SEC will be in going after individual government officials that participated in violations. After prevailing in a securities fraud case against the City of Miami and its budget director, the SEC saw its request for a fine of $450,000 reduced to only $15,000 by the Judge presiding in the case. While actions against individuals will likely continue, the Judge’s decision on the fine to be imposed may be of sufficient chastening effect for the SEC to reserve enforcement actions against individuals for only particularly egregious behavior.