SEC Announces securities fraud charges against the state of Kansas!

First, let's see the press release from the Securities and Exchange Commission's website:
Washington D.C., Aug. 11, 2014 — The Securities and Exchange Commission today announced securities fraud charges against the state of Kansas stemming from a nationwide review of bond offering documents to determine whether municipalities were properly disclosing material pension liabilities and other risks to investors. According to the SEC’s cease-and-desist order instituted against Kansas, the state’s offering documents failed to disclose that the state’s pension system was significantly underfunded, and the unfunded pension liability created a repayment risk for investors in those bonds. 
At first, this kind of headline might confuse someone studying for the Series 7. After all, aren't municipal securities exempt under the Securities Act of 1933 and the Securities Exchange Act of 1934? Yes, and yes. However, that just means they don't have to file registration statements with the SEC under the Securities Act of 1933 and don't have to file those annoying 10Q, 10K, and other reports that companies like SBUX and MCD have to under the SEA of 1934. Municipal securities are still securities and all securities are subject to anti-fraud statutes in the securities laws at both the federal and state level. Note that I didn't say every-thing is subject to the securities laws' anti-fraud statutes. I said all securities are. A fixed annuity is not a security, but a municipal bond or a Treasury Bond is still a security that is simply exempt from registration requirements. Big difference. The SEC already busted the chops of the State of IL, who has already implemented changes that involve making their own even worse pension fund situation clear to those buying their bonds. Kansas will likely follow suit, as they need to borrow money as much or more than any other state. Last thing they need is the SEC getting a federal court to prevent the State from issuing any bonds at all until they get their act together.Need help with your Series 7 exam?