SEC Files Charges in Municipal Bond “Flipping” and Kickback Schemes

The Securities and Exchange Commission today charged two firms and 18 individuals in a scheme to improperly divert new issue municipal bonds to broker-dealers at the expense of retail investors. According to the SEC’s complaint, the defendants – known in the industry as “flippers” – purchased new issue municipal bonds, often by posing as retail investors to gain priority in bond allocations. The defendants then “flipped” the bonds to broker-dealers for a fee. The SEC also charged a municipal underwriter for accepting kickbacks from one of the flippers. The SEC alleges that from at least 2009 to 2016, Core Performance Management LLC, RMR Asset Management Co., their principals, and certain of their associates, misrepresented their identities to gain priority in new issue municipal bond allocations.