On July 29, 2013, the SEC entered a pair of Cease and Desist Orders against West Clark Community Schools (the “School District”) and Citi Securities, the underwriter of certain municipal bonds issued by the School District (the “Underwriter”). The School District is located in Indiana and has approximately 4,500 students and is governed by a five-member Board of School Trustees (the “School Board”). The Underwriter is a small regional underwriter which was principally involved in underwriting Indiana bond offerings. In 2005, the School District sold $52 million of municipal bonds to the Underwriter. As part of the offering, the School District executed a continuing disclosure agreement (a “CDA”) pursuant to SEC Rule 15c2-12 (the “Rule”) under which the School District agreed to provide certain financial information and operating data on an annual basis, as well as timely notice of certain specified events as required by the Rule. In December 2007, the School District sold $31 million of additional bonds to the Underwriter. In the Official Statement for the 2007 offering, the School District stated that it had never failed to comply in any material respect with any previous undertaking entered into pursuant to the Rule. In addition, the School District executed a standard Rule 10b-5 certificate stating that the 2007 Official Statement did not contain any untrue statement of a material fact. In fact, the School District had never made any of the continuing disclosure filings which it had agreed to make in the CDA.

The SEC concluded in its Order relating to the School District that the School District had violated, among other things, Rule 10b-5 by making a false statement regarding its compliance with the CDA. The School District was required by the SEC to enter into certain undertakings under which it agreed to ensure that all required disclosures were made and to adopt written disclosure policies and procedures to ensure that filings would be made in the future.