The Securities and Exchange Commission (SEC) has recently announced charges against A.G.P./Alliance Global Partners, LLC (“Alliance”) concerning unfair practices within their municipal securities business. The charges highlight actions taken by Alliance that involved quoting and facilitating the sale of municipal bonds at prices that were not reflective of fair market value, disadvantaging other market participants. Alliance has agreed to a settlement to resolve these charges without admitting or denying the SEC’s findings.
According to the SEC’s order, the period between February 2019 and February 2021 saw Alliance engaging in a practice of publishing daily quotes for a substantial number of municipal bonds – ranging from 4,300 to 6,500. These quotes were consistently set at above-market prices for a client identified as a Sophisticated Municipal Market Professional. Critically, Alliance allegedly did not conduct independent evaluations to determine the fair market values of these bonds at the time of quotation. This practice extended to actual sales, where Alliance facilitated 204 transactions attributable to these inflated quotes, again without properly assessing prevailing market prices.
The consequences of these actions were significant. In 193 instances, Alliance reportedly purchased bonds from their customer at these inflated, above-market prices. Subsequently, they sold these same bonds at even higher prices to other dealers. This created a cascading effect, where these bonds were then sold to investors, or further passed through additional dealers, ultimately reaching investors at considerably elevated prices. The SEC order specifically points out at least 51 instances where Alliance’s payments to its customer were not only above market value but also deemed unfair and unreasonable. Furthermore, Alliance failed to properly classify these trades as “away from the market” when reporting them to the Municipal Securities Rulemaking Board’s (MSRB) Real-Time Transaction Reporting System, which is publicly displayed on the MSRB’s Electronic Municipal Market Access platform. This misreporting is particularly concerning as it could mislead other market participants who rely on this data for pricing and valuation of similar bonds.
The regulatory repercussions for Alliance Global Partners are substantial. They have consented to the SEC’s cease-and-desist order, which includes a censure of the firm. The SEC determined that Alliance violated multiple MSRB Rules (G-13, G-14, G-17, G-27, and G-30) and Section 15B(c)(1) of the Securities Exchange Act of 1934. In addition to the censure, Alliance has agreed to financial penalties, including disgorgement of $11,369.00, prejudgment interest of $2,407.38, and a civil penalty of $100,000.00.
The SEC’s investigation into Alliance Global Partners’ practices was a collaborative effort. Key individuals from the Enforcement Division’s Public Finance Abuse Unit (PFA), the Boston Regional Office, the Division of Examinations, the Enforcement Division’s Office of Market Intelligence, and the Enforcement Division’s Office of Investigative and Market Analytics contributed to the investigation. The SEC also acknowledged the valuable assistance provided by the staff of the MSRB in this matter. This case underscores the SEC’s commitment to ensuring fairness and transparency in the municipal securities market and holding firms accountable for practices that undermine market integrity and potentially harm investors.
