After almost 50 years in business, Jerry Riedl says he’s had his “first run-in with the SEC ever.”
Riedl is president, CEO and a major owner of Riedl First Securities Co. of Kansas, which is at 1841 N. Rock Road Court.
His company and a dozen others nationally were sanctioned for violating a Securities and Exchange Commission rule related to municipal bonds.
“Municipal issuers often set high minimum denomination amounts for so-called ‘junk bonds’ that have a higher default risk that may make the investments inappropriate for retail investors,” the SEC said in a statement.
The SEC “detected improper sales below a $100,000 minimum denomination set in a $3.5 billion offering of junk bonds by the Commonwealth of Puerto Rico earlier this year.”
Riedl says that in many cases, when a syndicate – or firms that commit to a certain number of bonds on a new issue – closes a deal, then the bonds can be freely traded.
“We were of the opinion that the bonds could be … sold in lower denominations,” he says.
Riedl says his firm had purchased a couple million dollars worth of bonds and sold some of them at lesser denominations to clients in March. He says he personally purchased $20,000 worth.
Then he says the SEC notified him that “very definitely these cannot be sold in less than … $100,000 increments, so we immediately canceled all of the issue.”
“Rules are rules,” Riedl says.
He says none of his clients lost money on the bonds.
“Many of my clients turned around and bought $100,000 (worth) after that, including myself.”
Of the 13 sanctioned firms, including Charles Schwab & Co., J.P. Morgan Securities, Oppenheimer & Co. and TD Ameritrade, Riedl First Securities had the highest penalty at $130,000.
“We were in good company, as you see,” says Riedl, who says the amount includes a penalty on his own purchase.
“I have to be stoic about it,” Riedl says of the situation. “It’s a part of doing business and not what you want to do, but that’s reality.”