SEC Penalizes Crews, Former CEO Harding for Battle in Bond Deal | Arkansas Enterprise Information

The U.S. Securities & Trade Fee has assessed a $200,000 penalty in opposition to Crews & Associates, the Little Rock bond brokerage, and an extra $100,000 penalty in opposition to its former CEO, Rush F. Harding III, for “unfair dealing” in a West Virginia municipal bond tender provide relationship again to 2015.

Harding, who stepped down as Crews’ CEO on the finish of 2019, was additionally ordered to disgorge $46,481 in commissions and imputed curiosity on the deal, whereas Crews was ordered to disgorge $44,072. Crews and Harding agreed to the orders “with out admitting or denying the SEC’s findings,” in response to a information launch issued Thursday by the SEC.

Harding was additionally forbidden to take part in new municipal bond choices or tender affords for a 12 months and ordered to get coaching. Harding, 68, had no earlier disciplinary historical past, in response to the SEC.

The orders resulted from an SEC examination that was then turned over to the company’s Public Finance Abuse Unit.

Paul Maco, an legal professional with the Bracewell LLP regulation agency in Washington, D.C., issued the next assertion on behalf of Crews: “Crews & Associates is happy to resolve this matter and is now seeking to the long run and devoting its full vitality to serving current shoppers, attracting new shoppers and continued development.”

In line with a 12-page order in opposition to Harding and a 10-page order in opposition to Crews, the brokerage did not disclose that it was shopping for and reselling bonds beforehand issued by Ohio County, West Virginia, on the identical time the brokerage was advising the county to purchase again the bonds at a premium so as to refinance at a decrease rate of interest. 

Crews had a bond underwriting relationship with Ohio County relationship to 2007 and had twice assisted the county in refinancing bond debt by way of tender affords in 2012 and 2014. Within the fall of 2015, in response to the SEC, Harding obtained the ball rolling on one other tender provide for bonds the county had issued in 2006.

Whereas the tender provide was being thought of, Crews & Associates started shopping for bonds from the sequence that its consumer was possible to purchase again. The bonds have been then resold — most of them to an affiliated firm of which Harding was additionally CEO. Crews and the unnamed affiliate are each subsidiaries of First Safety Bancorp of Searcy, of which First Safety Financial institution can also be a subsidiary.

And whereas Crews knowledgeable Ohio County that it’d maintain a place within the bonds, the SEC mentioned, it by no means revealed to the county authorities that it had already acquired tens of millions of {dollars} price of them. Crews in the end purchased nearly $6 million price of the bonds at market costs, of which the affiliate retained almost $3 million. 

Because the county’s underwriter, Crews additionally recommended the highest worth that the county authorities ought to pay for bonds tendered. On Crews’ suggestion, this “most acceptable worth” was set at 110% of the bonds’ face worth — greater than the market costs that Crews had paid (106.69% to 107.2%) however decrease than different most costs that Crews thought of recommending.

Crews’ affiliate firm supplied to promote its bonds again to Ohio County solely on the most worth. “For the reason that County didn’t obtain a adequate variety of tender affords at costs decrease than the Most Acceptable Worth, the County accepted the provide of the Affiliate,” the SEC order says.
The affiliate’s shares represented 71% of the shares tendered, in response to the orders.

“The tender resulted in important financial savings for the County,” the SEC acknowledged. Nevertheless it additionally benefited Harding and Crews. Harding personally obtained $36,524 in commissions; Crews made a web revenue of $34,631; and the affiliate that Harding headed additionally cleared $27,153.

The SEC discovered that Harding personally, and Crews below his steerage, violated various Municipal Securities Rulemaking Board guidelines. It additionally discovered that Crews did not correctly supervise its staff, and held Harding, as CEO on the time, personally answerable for that.