The Securities and Exchange Commission censured the town of Fairfield last month for failing to file timely financial reports and disclose that information in their bond offering documents.
Fairfield agreed with the SEC to “cease and desist” from future violations after the town failed to disclose that it was late in filing its financial reports when announcing a bond offering in 2011.
The SEC's announcement was part of a press release issued on August 24 to announce agreements with 71 municipal bond issuers across the country.
Fairfield told investors that it had only been late on its 2009 and 2010 reports. According to the SEC, “this was materially misleading because Respondent filed its fiscal 2006, 2007, and 2008 audited financial statements by 1,384, 1,017, and 652 days late, respectively.”
The SEC goes on to say that the Town of Fairfield “knew or should have known that this statement was untrue.”
Robert Mayer, Chief Financial Officer for the town of Fairfield, says that it was actually the underwriters and the town of Fairfield, itself, that reported the late filings to the SEC in 2012 and again in 2014.
Prior to 2009, towns and municipalities had to send their financial disclosures via regular mail. The CFO at the time said that he had mailed them but they “didn’t get there,” according to Mayer.
Following 2009, the documents were filed electronically. Although the town was late on filings after 2009, they reported it and believed those were the only mistakes at the time.
Following the disclosure of the prior mistakes and subsequent investigation, the SEC issued its censure.
Towns and municipalities are legally required to disclose to potential bond-holders any issues or failure to submit financial information, which helps bond-buyers determine whether or not they want to invest.
As part of its agreement with the SEC, Fairfield will have 180 days to update their policies and procedures to prevent late filings in the future and must comply with any further investigation. Furthermore, Fairfield is required to disclose this cease and desist order in any future bond offerings.
Moody’s rating agency reiterated its triple-A rating of Fairfield in March of 2016, when the town issued a bond offering of $22.7 million.
Mayer described the censure as a “non-event” and said that it will have no effect on the town’s credit rating or bond offerings. “It took a lot of time to draft everything,” he said, “but other than that there was really zero effect.”
Fairfield currently has $165 million in bonded debt outstanding. Moody’s statement said the town’s credit rating could be affected by “adoption of a less conservative approach to budgeting and financial management.”