The Securities and Exchange Commission (SEC) for the first time punished a broker-dealer for providing advice to a municipal entity without registering with the agency as a municipal adviser.

Loop Capital Markets, based in Chicago, advised a Midwestern city from 2017-19 on the purchase of fixed income securities but was not registered as a municipal adviser as required under federal securities law. In addition, Loop Capital “did not maintain a system reasonably designed to supervise its municipal securities activities and had inadequate procedures, including insufficient methods to identify potential violations of the municipal adviser registration rules,” the SEC said Wednesday in a press release.

Without admitting or denying the allegations, Loop Capital agreed to be fined $100,000, pay disgorgement and prejudgment interest of approximately $5,500, and be censured.

“The municipal adviser registration rules apply to all market participants and are intended to protect municipal entities from abuse,” stated LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Public Finance Abuse Unit. “Registered broker-dealers must either register as municipal advisers or refrain from engaging in municipal advisory activities.”

Compliance considerations: In addition to failing to register as a municipal adviser for two years, Loop Capital had “inadequate procedures to enable its registered representatives to identify circumstances where a customer seeks advice with respect to the investment of municipal bond proceeds, inadequate training relating to the municipal adviser registration requirements, and inadequate electronic communication surveillance procedures to identify potential violations of the municipal adviser registration rules,” according to the SEC’s order.

As a result, Loop Capital failed to detect or prevent such advice from being provided to the municipal entity and “failed to maintain a system to supervise the municipal securities activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws, regulations and [Municipal Securities Rulemaking Board] rules,” the SEC said.

The firm implemented remedial measures in response, including improvement to supervisory procedures, training, and surveillance, the order said.

Loop Capital did not respond to a request for comment.