Holloway said he does not believe either he or the aldermen fully understood the complexity of the swap transaction in 2006.

“When they first came to us, I had never seen anything like it,” he said.

Holloway said since the original swap, he has gained a better personal understanding and knowledge of swap transactions.

The aldermen recently voted to draft the paperwork for a modification to the swap after Malachi representatives came to the aldermen in February offering to modify the agreement and make a projected $300,000.

If the transaction can generate the target floor amount set at $250,000, the city will pay approximately $80,000 in transaction and legal fees. Malachi’s Chief Executive Officer Porter Bingham told aldermen in February the city would pay approximately $50,000 in advisory fees and approximately $25,000-$30,000 to outside legal counsel.

Holloway said if the swap modification does not generate at least $250,000, the city will not pay the fees and will not be out any money.

Previous Malachi transactions

Malachi Financial Products is an Atlanta-based financial company and is not affiliated with Malachi Financial Group in Ridgeland.

In February when the swap modification was announced and approved in an aldermen meeting without prior public notice, a number of city residents questioned the transaction and Malachi’s credentials and whether or not the city’s leaders understood the deal to which they were agreeing.

According to Financial Industry Regulatory Authority documents, Bingham was fined $10,000 and had his registration suspended for a year in 2007 for multiple violations of the Securities and Exchange Act.

FINRA is the largest independent regulator of financial securities firms in the U.S.

The violations included failure to keep current and accurate books and records regarding Malachi’s business, including balances, general ledgers and net capital calculations. FINRA records also show Bingham failed to file Malachi’s annual audit on time for its 2004 and 2005 fiscal years and violated the authority’s conduct rule.

But Bingham said Malachi has never been involved with a swap transaction that did not produce positive results. Bingham said Malachi has executed transactions similar to the ones with the City of Natchez with municipalities all over the country, including the City of Jackson and Hinds County.

The swap transactions in Hinds County drew scrutiny after routine annual audits of the county’s finances noted the complexity of the county’s swap transactions and the county’s inability to effectively monitor the transactions.