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SEC Settles Enforcement Actions Against Municipal Bond Offerings Participants for Violations That Put at Risk the Bonds' Tax-Exempt Status


Washington, D.C., September 28, 2007 - The Securities and Exchange Commission today announced settled enforcement actions against two California companies for their failure to disclose a fee agreement that created a risk to investors that interest on $650 million of municipal bonds might lose its tax-exempt status. The charges against CDR Financial Products, Inc. (formerly known as Chambers, Dunhill, Rubin & Co.) and Anchor National Life Insurance Company, (now doing business under the name of AIG SunAmerica Life Assurance Company) relate to three municipal bond offerings in Florida.

Chairman Christopher Cox said, "Municipal bond investors deserve full and fair disclosure of the important facts about their investments, including particularly the facts that bear on the tax status of their bonds. Today's enforcement actions demonstrate our continued commitment to upholding integrity in this critical market, and the protection of investors in municipal bonds."

Linda Chatman Thomsen, Director of the Commission's Division of Enforcement," said "The tax-exempt status of municipal bonds is of paramount importance to investors who buy them. In these bond offerings, information was not disclosed that could have jeopardized this status. These enforcement actions reaffirm disclosure obligations that provide important protection to municipal bond investors."

David Nelson, Director of the SEC's Miami Regional Office, said, "Our dedication of staff and resources to these enforcement actions should remind participants in municipal bond offerings that we remain committed to protecting those who invest in the bonds."

Martha Mahan Haines, Chief of the SEC's Office of Municipal Securities, added that, "CDR and Anchor served specialized functions in certain municipal bond offerings. Their fee agreement could have affected the tax-exempt status of the bonds. As a result, CDR and Anchor should have made sure it was disclosed."

The separate actions both relate to three bond offerings in Florida in 1999 and 2000. The Commission's Orders find that Anchor served as the credit enhancement provider, and that CDR served various roles, in the three offerings. The Commission's Orders further find that the existence of the fee agreement between CDR and Anchor was material for several reasons. Among other things, the bond proceeds were to be used for originating loans, and therefore CDR's receipt of payment on unloaned bond proceeds created a potential conflict with the offerings' purpose.

In addition, tax regulations require bond issuers to have a reasonable expectation that most of the bond proceeds would be loaned out within three years. Without knowledge of the fee agreement, the issuers made calculations, disclosures and certifications relating to their reasonable expectation regarding loan origination within the required time without having all information that was material to that issue. Moreover, the fee agreement also created a risk that the Internal Revenue Service would declare the bonds to be arbitrage bonds, with accompanying potential negative tax consequences.

The Commission's Orders also find that in one bond offering, CDR executed a certificate that was misleading in light of the undisclosed fee agreement.

The Commission's Order against CDR finds that CDR violated Sections 17(a)(2) and (3) of the Securities Act of 1933 (Securities Act). The Commission's Order against Anchor finds that Anchor was a cause of violations of Section 17(a)(2) of the Securities Act. Both parties consented to a cease-and-desist order against further violations of those provisions without admitting or denying the Commission's findings.

The SEC acknowledges the assistance of the Internal Revenue Service in this matter.

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For further information contact:

Glenn S. Gordon
Associate Regional Director
Miami Regional Office
(305) 982-6360

Eric R. Busto
Assistant Regional Director
Miami Regional Office
(305) 982-6362



Modified: 09/28/2007