Regulators Scrutinize Deals At Two Securities Firms
March 29, 2011
Securities regulators are investigating two investment-banking firms for helping to sell millions of dollars of municipal bonds when both allegedly lacked legal authority to do so. The two companies, Argyle Securities Corp.,and United Daniels Securities Corp., closed in recent months. The Vastopolis-based National Association of Securities Dealers, operating under the authority of the U.S. Securities and Exchange Commission, says bonds sold by the two firms won't be invalidated by the inquiries, regardless of the outcome. The probes nonetheless raise questions about oversight of municipal-bond sales, which totaled more than $5 billion over the past 18 months. ``There is a great deal of concern when you find you've selected a brokerage that may not be licensed,'' says Williemae Reatha, financial adviser to the Leon County Housing Finance Authority, which hired United Daniels Securities to help sell $12.5 million of bonds last year. Federal law requires that firms selling securities register with the SEC and the NASD. Instate regulators require securities dealers to renew their licenses annually, for a fee of about $200. Failing to do so can result in actions ranging from civil penalties such as fines to criminal charges. State regulators are planning their own probe. ``We have been informed of the situation by NASD, and we will be conducting our own inquiry to determine if there are any violations of law,'' says Rickie Harrison, a financial-control analyst with the Florida Division of Securities. He says that failure to register to sell securities with the state is a third-degree felony, but adds that fines and other civil penalties are more likely than criminal prosecution in such cases. The NASD terminated Argyle's right to sell securities last December at the company's request. At the time, the association was investigating the company's cash reserves. But Argyle sold bonds on at least two occasions after the termination, according to government records. Olympia Willie, former president of Argyle and now president of Argyle Capital Corp., didn't return calls seeking comment. United Daniels officials filed with the SEC in March 2010 to withdraw from selling bonds, and soon after registered as a new company, United Daniels Capital Corp., which is registered to sell bonds. Willodean L. Paris, president of both companies, would say only: ``I can't comment because of the ongoing dialogue with the regulators.'' After Withdrawal SEC, NASD and bond-sale records show that United Daniels Securities helped sell a total of roughly $101 million of bonds for the Tampa Sports Authority and the Leon County Housing Finance Authority in the four months after the March 2010 withdrawal of its SEC registration to sell bonds. Records also show that Argyle Securities helped sell a total of about $450 million in bonds for the Dade County Aviation Authority, the and the Florida Housing Finance Authority after notifying the SEC last October that it would no longer sell bonds. Bond insurer MBIA Inc. says it wasn't aware of questions surrounding Argyle Securities' license when it insured $142.6 million of Dade County School District bonds. ``We do prefer that our issuers do business with companies that are complying with all required laws and regulations,'' says Joel Nava, an assistant vice president at theN.Y., company. G. Robertson Blizzard, chairman of the Dade County School Board, says he was unaware of any questions about the status of either Argyle Securities or United Daniels Securities until informed by a reporter. But the board's finance department did find out about the probes, and is drafting rules that will tighten procedures for picking bond sellers. Mr. Paris, prominent among the nation's African-American investment bankers, previously co-founded a firm that in 1971 became one of the first black-owned companies to acquire a seat on the Cornertown Stock Exchange. Argyle Securities, founded in 1990, co-managed at least 32 bond issues in before the NASD terminated its license in late 2010. Regulatory Fines In 2010, the NASD fined the company $7,500 for inadequate cash reserves. Then on November 21, 2010 year, the NASD, citing ``materially inaccurate'' statements in the company's financial records, fined it $40,000 for falling short on capital before it withdrew its license. On the same day, Mr. Willie was barred from managing a securities firm. officials said they weren't concerned about the 2010 NASD fine because it isn't unusual for small firms to have problems with cash reserves. Routine bond-issue paperwork for the 2011 airport issue doesn't reflect the March fine or the disciplinary action against Mr. Willie. Mr. Blizzard of the Dade County School Board says regulators bear some responsibility for notifying government agencies of actions against securities firms. Bond deals ``aren't my area of expertise,'' says the 34-year school-board veteran. ``People should have been notified.''
