April 2, 2019

Public Finance: Case Law Update

The past week brought several cases of interest to state and municipal bond issuers.  First, in Lorenzo v. SEC, the U.S. Supreme Court found that a person who knowingly distributes false statements made by another person can be held liable as a primary violator of Rule 10b-5.  Second, the SEC settled an enforcement action with the former Controller of The College of New Rochelle in connection with false statements made in continuing disclosure filings as the College’s financial condition worsened. Finally, in the ongoing Puerto Rico Title III restructuring litigation, the First Circuit affirmed the U.S. District Court’s decision dismissing certain bond insurer claims, agreeing that although “special revenues” retain their lien post-petition, application of special revenues to pay debt service during the pendency of the proceedings is permissible but not mandatory.

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