New Jersey gets cease and desist order from SEC tied to underfunding

By Jennifer Chiou

New York, Aug. 18 - The Securities and Exchange Commission announced that it issued an order to the State of New Jersey instituting cease and desist proceedings regarding the alleged underfunding of two of the largest pension plans in the state.

According to an SEC release, the commission alleged that New Jersey misrepresented and failed to disclose material information regarding its underfunding of the Teachers' Pension and Annuity Fund and the Public Employees' Retirement System in the offer and sale of over $26 billion of municipal bonds.

The securities were issued in 79 offerings from August 2001 through April 2007.

The SEC said that the state did not adequately disclose why it was underfunding the funds or the potential effects of the underfunding.

In the order, the commission stated that New Jersey's misrepresentations and omissions created the fiscal illusion that both funds were being adequately funded and masked the fact that New Jersey was unable to make contributions without raising taxes or cutting other services, or otherwise impacting the budget.

The SEC added that the state consented to the order without admitting or denying the findings, thus agreeing to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act.

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