Since the 2008 financial crisis, we have observed a heightened scrutiny of the municipal bond markets from various federal agencies, including the Securities & Exchange Commission, the Internal Revenue Service and the Department of Justice. This additional attention has, in most cases, spawned both criminal and civil litigation.

These agencies have begun contacting some issuers regarding various aspects of their outstanding debt. Notifications vary from full audits and subpoenas for documents in third party investigations to questionnaires and letters of inquiry regarding proper use and investment of bond proceeds, compliance procedures and amount of federal subsidy payments.

Examples of these investigations are discussed in a recent Wall Street Journal article.

In the article, the author describes how Miami city officials are dealing with an investigation into whether the City of Miami used bond funds appropriately. The article discusses the decision by some cities to transfer and use funds for purposes other than those that they may have originally been designated for, and states that, "The moves are exposing municipalities to controversy, as federal regulators and local auditors are more heavily scrutinizing their finances to protect bond buyers and taxpayers."

Targets of these federal inquiries have not been specified, but our goal is to educate all of our clients in the event they receive one of these notifications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.