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Enforcement
First Southwest In 'Tainted' JPM Deal
SEC Cites 'Fraudulent Bidding’
Thursday, July 14, 2011
By Lynn Hume
The Bond Buyer
WASHINGTON — First Southwest Co., as bidding agent for a repurchase agreement related to a $233 million bond deal in Texas for which it was financial adviser, improperly allowed JPMorgan Securities to lower its bid for the repo, reducing the issuer’s investment rate, according to documents and transaction participants.
The Securities and Exchange Commission said the deal, involving bonds issued in 2005 by the Central Texas Regional Mobility Authority, was one of many that involved “fraudulent bidding practices” that JPMorgan engaged in with the assistance of bidding agents.
The SEC described the transaction without identifying the bidding agents or issuers in the complaint. It was filed last week against JPMorgan in connection with its $51.2 million settlement of securities fraud violations for bid-rigging of muni-bond related reinvestment contracts. The complaint only noted that the bidding agent for the repo in the Texas authority’s deal was one of the FAs for the bond deal.
But the final judgment issued a few days ago by a federal judge in New Jersey — which approved the settlement and imposed a permanent injunction against JPMorgan prohibiting further violations — listed the bond issuers. Transaction participants identified First Southwest as the FA for the bond deal and the bidding agent.
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