The U.S. Securities and Exchange Commission is probing Rhode Island’s bond offerings, The Associated Press reports.
Rhode Island General Treasurer Gina Raimondo said the SEC told her Monday that it had “opened an investigation relating to the state’s bond offerings.” She said the SEC gave her no additional details about the probe, and it had not yet requested any information from her office.
The SEC is already investigating how Illinois reports pension costs to bond investors, and looking into whether Harrisburg, Pa., provided appropriate information to bond investors. Elaine Greenberg, chief of the SEC’s municipal securities and public pensions unit, said in August that the agency wants to make sure states and municipalities are adequately disclosing their pension fund liabilities.
The size of a state or municipality’s unfunded pension liability can affect its bond rating, and make it more or less expensive to borrow money. A larger unfunded pension liability means more risk for investors.
Raimondo, a Democrat who took office last month, said that because the SEC has given her so little information, it is not clear to her whether the investigation focuses on Rhode Island’s unfunded pension liability and how it is disclosed to those who buy bonds issued by the state. But she said she wasn’t surprised by the SEC’s call Monday because Rhode Island is one of many states with precarious finances and a large unfunded pension liability.
She said her office would cooperate fully with the investigation.
Earlier on same day she got the call from the SEC, Raimondo launched a review of her department, including how it makes disclosures to bond investors. She said at the time that the state’s current bond disclosures are in good shape, but there is room for improvement.
She said that regardless of the probe, she has already begun to work to improve Rhode Island’s disclosures to investors, and she said the disclosures will be better when the state makes its first bond offering this year under her watch.
“I think the state can do a better job of providing greater disclosure around its unfunded pension liability,” she said. “The state needs to be able to access the bond market in the years to come on the most favorable terms possible. It is critical to present a complete picture of our finances to potential bond investors.”
