SEC Fines Former O.C. Underwriter

RBC Dain Rauscher Inc. will pay a half-million-dollar penalty to settle a Securities and Exchange Commission proceeding stemming from its role in underwriting and advising Orange County municipal borrowers, the SEC announced late Tuesday.

The firm, a successor to Rauscher Pierce Refsnes Inc., didn’t admit or deny allegations that documents prepared by Rauscher for a dozen Orange County bond offerings failed to disclose their risks.

Documents for offerings in 1994 also neglected to report declining investment performance, which forced Orange County into bankruptcy that year, the SEC said.

Rauscher served as underwriter or financial advisor to Anaheim and Irvine and four county school districts that raised $680 million through bond offerings, which were invested in pools managed by the country treasurer. The pools suffered huge losses as interest rates rose.

“RBC Dain Rauscher is pleased to have this matter resolved. It relates to events that occurred almost 10 years ago and RBC Dain Rauscher has implemented many changes in procedures and personnel since that time,” said the firm’s attorney, Michael Missal.

In addition to paying a $500,000 fine, the firm agreed to cease and desist from future violations.

The SEC agreed to dismiss its case against former Rauscher investment banker Virginia Horler, now retired, and a pending case in federal court against Rauscher.

The SEC’s case against Kenneth Ough, another former Rauscher investment banker, is continuing. Ough, who drafted offering documents for 10 bond offerings, initially succeeded in a motion to dismiss the SEC’s case.

The agency appealed the ruling and won a reversal from the 9th Circuit U.S. Court of Appeals, sending the case back to U.S. District Court in Orange County.

A trial date has not been set.