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Citigroup breaks securities law in Jefferson County bankruptcy deal, lawsuit says

Citigroup breaks securities law in Jefferson County bankruptcy deal, lawsuit says

BIRMINGHAM, Alabama — The Wall Street investment bank leading Jefferson County’s pitch to exit Chapter 9 municipal bankruptcy could be violating securities law if it serves as an underwriter in the deal, a lawsuit brought by Jefferson County sewer ratepayers says.

Under the Dodd-Frank Wall Street reform and Consumer Protection Act, an investment bank may not act as both a financial advisor to a municipal issuer and as an underwriter when that debt goes to market. Serving in both roles could create a conflict of interest for the bank, and the practice was outlawed in 2011.

That appears to have been what’s happening as part of Jefferson County’s plan to exit bankruptcy.

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