SEC: BOK Financial to Pay $1.6m for Turning Blind Eye to Investment Scheme

The US Securities and Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Commission (SEC) today announced that a subsidiary of US-based BOK Financial Corporation (BOKF) has agreed to pay over $1.6 million settlement charges after concealing numerous problems and red flags from investors in municipal bond offerings, to purchase and renovate senior living facilities.

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The agency also filed a court complaint against a former senior vice president at the bank, Marrien Neilson, who allegedly was chiefly responsible for the failures of the bank’s corporate trust department while overseeing what turned out to be fraudulent bond offerings managed by businessman, Christopher Brogdon.

Brogdon has since been charged with fraud and ordered by the court to repay $85 million to investors.

Background

The latest complaint comes after investment firm WL Ross & Co agreed to pay a $2.3 million fine to the watchdog to settle charges after not adequately disclosing some of the fees it charged investors last month, in an increasing number of cases being handled by the US watchdog.

According to the SEC, BOKF NA failed in its gatekeeper role as indenture trustee and dissemination agent for Brogdon’s bond offerings. BOKF and Neilson became aware that Brogdon was withdrawing money from reserve funds for the bond offerings and failing to replenish them, and had failed to file annual financial statements for the offerings.

BOKF and Neilson also knew that the nursing home facilities serving as collateral for one of the bond offerings had been closed for years. However, Neilson allegedly warned others that disclosing these and other problems could impair future business and fees from Brogdon, upset bondholders, and cause regulatory issues for bond underwriters and therefore decided not to inform bondholders as per requirements.

Turned a "Blind Eye"

Lara Shalov Mehraban, Associate Regional Director of the SEC’s New York Regional Office, said: “BOKF was in a crucial gatekeeper position to stand up for bondholders and notify them about material problems with the bonds, but instead turned a blind eye and chose to protect Brogdon and the fees it collected from his deals.”

BOKF agreed to pay back $984,200.73 of the fees the bank collected from its work with Brogdon. The bank also agreed to pay interest totalling $83,520 and a penalty of $600,000.

BOKF promptly terminated Neilson's employment following an internal investigation and reported its misconduct to the SEC.