SEC Charges Hilltop Securities and Trader for Misconduct in Municipal Offerings
July 9, 2021
File No. 3-20389
July 9, 2021 - The Securities and Exchange Commission today instituted a settled enforcement action against Hilltop Securities Inc. and Daniel C. Tracy, a Hilltop municipal trader, for improperly obtaining retail priority allocations of new issue municipal bonds when Hilltop, a broker-dealer, was not entitled to such priority. Municipal issuers hold retail order periods to give first priority to orders from retail investors in the bond allocation process.
The SEC's order found that between January 2016 and April 2018, Tracy, on behalf of Hilltop, submitted new issue bond orders to a registered representative at a co-managing underwriter during retail order periods, when Tracy should have known that the representative was improperly submitting these orders as retail customer orders. Without admitting or denying the SEC's findings, Hilltop consented to a cease-and-desist order finding that it willfully violated the fair dealing and supervisory provisions of MSRB Rules G-17 and G-27, and failed reasonably to supervise within the meaning of Section 15(b)(4)(E) of the Securities Exchange Act of 1934. The order imposes a censure and requires Hilltop to pay an $85,000 civil penalty, $206,606 in disgorgement and $48,587 in prejudgment interest. Without admitting or denying the SEC's findings, Tracy consented to an order finding that he violated MSRB Rule G-17, requiring him to pay a $25,000 civil penalty, and imposing a 12-month limitation on his ability to offer, purchase, or sell negotiated new issue municipal securities.
The SEC's investigation was conducted by the Division of Enforcement's Public Finance Abuse Unit, including Joseph Chimienti, Laura Cunningham, Warren Greth, Cori Shepherd, and Jonathan Wilcox, with assistance from Deputy Unit Chief Mark Zehner and Assistant Director Kevin Guerrero. The investigation was supervised by Ivonia K. Slade.