SEC hits 13 firms over Puerto Rico bond sales

The Securities and Exchange Commission announced fines Monday against more than a dozen brokerage firms accused of violating regulations designed to protect retail investors from high-risk bonds.

Among 13 firms penalized in the action were Charles Schwab & Co., J.P. Morgan Securities and the National Securities Corp, the agency said.

The SEC’s investigation uncovered 66 occasions when dealer firms sold bonds issued by the commonwealth of Puerto Rico to investors for less than the required $100,000 minimum denomination set in a $3.5 billion offering of junk bonds.

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This is the first enforcement action under the SEC rule establishing the smallest amount of municipal bonds brokers are allowed to sell to investors in a single transaction.

“Because retail investors tend to purchase securities in smaller amounts, this minimum denomination standard helps ensure that dealer firms sell high-risk securities only to investors who are capable of making sizeable investments and more prepared to bear the higher risk,” an SEC news release said.

Each firm has agreed to pay the penalties, which range from $54,000 to $130,000.

The other firms behind the improper sales include Hapoalim Securities USA, Interactive Brokers LLC, Investment Professionals Inc., Lebenthal & Co., Oppenheimer & Co., Riedl First Securities Co. of Kansas, Stifel Nicolaus & Co., TD Ameritrade, UBS Financial Services and Wedbush Securities.