The Beaumont Financing Authority (BFA) has reached a settlement with the U.S. Securities and Exchange Commission (SEC)

Beaumont, CA— The Beaumont Financing Authority (BFA) has reached a settlement with the U.S. Securities and Exchange Commission (SEC). Under the terms of the settlement, the BFA neither admits nor denies the allegations and will not pay any financial penalties. Pursuant to the settlement, the BFA has agreed to a number of compliance undertakings. Throughout the investigation, the City committed substantial resources to cooperating with the SEC, and the City commends the professionalism and thoroughness of the SEC Staff.

According to the SEC’s August 23, 2017 Press Release, the SEC’s allegations related to events that occurred between 2003 and 2013 under former City Manager and BFA executive director Alan Kapanicas. Mr. Kapanicas is alleged to have approved and signed the misleading offering documents. In settling the charges, Mr. Kapanicas agreed to pay a penalty of $37,500 and agreed to be barred from participating in any future municipal offerings. Additionally, the SEC announced that the underwriter, O’Connor & Company Securities, Inc. and its co-founder and former primary investment banker Anthony Wetherbee, agreed to settle the charges. O’Connor & Company Securities Inc. served as the underwriter under the Alan Kapanicas administration and will pay a $150,000 penalty. Mr. Wetherbee also agreed to pay a $15,000 penalty and serve a suspension from the securities industry for six months.

According to Mayor White, “Throughout the investigation, the City fully cooperated with the SEC Staff and appreciated the Staff’s diligence. According to the SEC’s Press Release, the investigation arose from a review of municipal issuers and underwriters that did not voluntarily self-report under the agency’s Municipal Continuing Disclosure Cooperation (MCDC) Initiative. We are pleased to have this chapter behind us and look forward to continuing to cooperate with the SEC Staff and to further enhancing our compliance efforts moving forward.”

Under the terms of the SEC settlement, the BFA has agreed to compliance undertakings, including the establishment of written policies and procedures and periodic training regarding all aspects of municipal securities disclosures and the accounting of bond proceeds and record keeping. The BFA will also retain an independent consultant, to conduct a review of the BFA’s policies and procedures as they relate to all aspects of municipal securities disclosures, the accounting of bond proceeds and record keeping. The independent consultant will be responsible for submitting a written report of its findings to the BFA and the BFA shall adopt the recommendations contained in the report. As part of the settlement, the BFA consented to the entry of an Order by the SEC to cease and desist from committing or causing any future violations of Section 17(a)(2) and 17(a)(3) of the Securities Act.

“The BFA is pleased to resolve this investigation without any financial penalties that would further hinder the City’s financial recovery. We look forward to working with an independent consultant to help the BFA further establish strong policies in all aspects of our municipal disclosures, the accounting for bond proceeds and record keeping. Through this settlement, the City will be making an investment in itself to better ensure full compliance and best practices going forward. We also want to remind investors and the community that the neither the BFA nor the City has ever defaulted on the payment of debt service on any of its bonds,” stated Mayor White.