SEC Reaches Historic Yield-burning Settlement.

• Position: Securities and Exchange Commission - Brief Article

Seventeen Wall Street firms have, agreed to pay more than $138.3 million to reimburse the U.S. Treasury and compensate state and local governments for losses in connection with advance refundings. The 3,603 advance refundings, conducted between 1990 and 1994 resulted in yield burning--an act in which dealers overcharge issuers for open-market Treasuries sold for refunding escrows, and the markups reduce or "burn" the investment yield so that it is below the bond yield and does not generate illegal arbitrage profits. The settlement, which will preserve the bonds' tax-exempt status, is...