U.S. Securities and Exchange Commission municipal securities director warns of governance, disclosure and liability risks in California joint powers authorities and energy prepays

In remarks to California municipal issuers and market participants, Dave A. Sanchez, director of the U.S. Securities and Exchange Commission’s Office of Municipal Securities, warned that privately run, bond issuing joint powers authorities may expose member agencies and investors to elevated default, governance and securities law risks. His remarks extend his earlier focus on municipal advisor duties and market transparency by applying those concerns to structures in which issuance linked compensation, weak public oversight and opaque fees may influence financing decisions and disclosures. Sanchez said USD 3.12 billion of essential housing debt was impaired as of August 2026 and cited governance failures in which member agencies had limited access to information or influence over projects. Potential violations include misleading or incomplete primary and continuing disclosures, breaches of municipal advisors’ fiduciary duties and unregistered advisory activity. Member agencies could also face control person liability if they cede oversight, while municipal advisors recommending a privately run authority may need to explain alternative financing routes, fees, default history and differences in public benefit. He also urged scrutiny of energy prepay bonds, which exceeded USD 100 billion outstanding in 2025 and represented more than 5% of the Bloomberg Municipal Index. Municipal advisors should explain projected savings, total fees, the value transferred to private funding recipients and risks including failed remarketings, higher carrying costs and disrupted pricing, enabling municipal entities to assess the transaction’s true economics.