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Dec-29-2009Regulators ask Stifel to accelerate ARS buyback(topic overview)
CONTENTS:
- The accelerated repurchase plan is part of an agreement Stifel reached with state regulators in Missouri, Indiana, Colorado and other members of the North American Securities Administrators Association ("NASAA") Task Force regarding ARS. The settlement includes a $525,000 fine that will be shared by the states participating in the NASAA settlement. (More...)
- Stifel Financial Co. will speed up its repurchase of auction rate securities under a settlement reached with Missouri Secretary of State Robin Carnahan. (More...)
- The securities, which are held at Stifel Nicolaus & Co Inc by the company's retail investors, will be repurchased by December 2011, six months earlier than previously planned, the company said. (More...)
- Stifel also agreed to pay a $525,000 fine to Missouri and other states that participated in the settlement, along with $250,000 to Missouri and $25,000 to Indiana to cover investigative and legal costs. (More...)
- The Indiana Securities Division of Rokita's office filed an administrative complaint against Stifel in October, alleging securities fraud, failure to properly supervise and train salespeople, and that the investments were not suitable for Stifel's customers. (More...)
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The accelerated repurchase plan is part of an agreement Stifel reached with state regulators in Missouri, Indiana, Colorado and other members of the North American Securities Administrators Association ("NASAA") Task Force regarding ARS. The settlement includes a $525,000 fine that will be shared by the states participating in the NASAA settlement. The settlement calls for payments of $250,000 to Missouri and $25,000 to Indiana for their costs of investigation, expenses and other payments. [1] The settlement resolves lawsuits or other complaints by Missouri, Indiana, Colorado and other state members of the North American Securities Administrators Association, a Stifel spokesman said. The settlement announced Monday also requires Stifel to hire a securities-industry expert to oversee its employee training, marketing and selling of nonconventional financial products, so that customers can better understand their potential risks. [2]
According to Rokita's office, 142 Indiana investors held $54 million in auction-rate securities sold by Stifel. Rokita's office announced late this afternoon that Indiana residents who purchased auction-rate securities from Stifel will regain complete access to their investments within the next 24 months under the settlement. It was part of a global settlement coordinated through the North American Securities Administrators Association. [3]
Stifel will then continue making accelerated payments to investors over the next two years. All Stifel investors who had $150,000 or less tied up in auction-rate securities will be made whole by Dec. 31, 2010, and all remaining investors will regain complete control of their investments by the end of 2011. Stifel had previously pledged to pay back all its auction-rate investors by June 2012. Under the settlement, Stifel has also agreed to hire an outside consultant to review and make recommendations about its internal supervisory and compliance policies and procedures related to the sale of non-conventional investments. [3]
The settlement resolves lawsuits or other complaints by Missouri, Indiana and Colorado. Stifel previously had set a deadline of 2012 to buy back all auction-rate securities held by its retail investors. [4] The regional brokerage and financial services firm based in St. Louis will return up to $41 million to investors by the end of 2010, with everyone to be paid in full by the end of 2011. Stifel had originally set a deadline of June 30, 2012, to buy back all auction-rate securities held by its retail investors who bought them prior to the February 2008 collapse of the market for the securities. [2]
ST. LOUIS - (Business Wire) Stifel Financial Corp. (NYSE: SF) announced today that its subsidiary Stifel Nicolaus & Company, Incorporated ("Stifel") will complete its repurchase of auction rate securities ("ARS") -- held at Stifel by the company's retail investors -- no later than December 2011, six months earlier than previously planned. Eligible investors are those retail clients who bought ARS through Stifel before the collapse of the ARS market in early 2008 and continue to hold those ARS at Stifel. [1] ST. LOUIS ''' Financial services firm Stifel Nicolaus Co. has reached an agreement with Missouri and other states that will speed up the buyback of auction rate securities from individual investors. [4] Financial services firm Stifel Nicolaus & Co. will complete the buyback of auction-rate securities from individual investors six months early under a settlement reached Monday with Missouri and other states. [2]
St. Louis-based money management firm Stifel, Nicolaus and Co., whose clients include some of Indiana's wealthiest people, has reached a settlement agreement with Indiana Secretary of State Todd Rokita over the company's handling of $54 million in auction-rate securities sold here. [3]
Because only a handful of previous auctions ever had failed, many investors considered the securities a safe form of temporary financing--essentially a better-yielding alternative to money market accounts. Stifel maintained its innocence from the start of Rokita's investigation. It voluntarily promised to buy back all its clients' auction-rate securities over three years--a deal it claims 100 percent of its Indiana clients had already accepted before Rokita filed his complaint. [3] The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions, some as frequently as once a week. Many investors bought the securities believing they were similar to a money market, a traditionally safe and liquid investment. They found their funds frozen when the ARS market fell apart last year amid the downturn in the broader credit markets. [2] Auction-rate securities are bonds whose interest rates are meant to be reset regularly at daily, weekly or monthly auctions. Many financial firms marketed them as safe, liquid and cash-like investments. When credit markets seized up as the recession deepened, auctions began to fail, freezing the $200 billion global market and leaving investors unable to access their money. [3]
Auction-rate securities are long-term debt instruments whose interest rates are regularly reset through auctions. The market froze in February 2008 as the credit crunch took hold, trapping investors and issuers and prompting complaints from investors around the country who were unable to withdraw money from their accounts. [5]
Stifel was one of many firms that sold auction-rate securities to investors as a higher-interest alternative to money market funds. [6]
The settlement is the latest in a string of deals banks across the nation have struck with regulators following the failure of the auction-rate securities market last year. States, including California, New York and Massachusetts, launched probes of Wall Street practices in the market following allegations they misled clients by assuring them the auction-rate securities were a safe, liquid alternative to cash, certificates of deposit or money market funds. [5] Under the deal, all customers with auction-rate securities will receive a partial settlement by Jan. 15. All with less than $150,000 in such securities will exchange them for cash by December 2010. The remaining investors can redeem their bonds by the end of 2011. [6]
To say you committed fraud by not disclosing an unknown risk can only be true with the benefit of hindsight." Under the settlement, Stifel will repurchase from each eligible Indiana investor the greater of $25,000 or 10 percent of their auction-rate holdings by Jan. 15, 2010. [3] The settlement also calls for Stifel to hire an independent consultant who will review the firm's supervisory and compliance policies and procedures solely for non-conventional investments. Stifel completed its first repurchase of ARS as scheduled in June 2009. It will move up to next month a repurchase from eligible investors of the greater of 10 percent or $25,000 of eligible ARS and follow with similar repurchases next December and again in December 2011. That will exceed the initial target date for completing the voluntary repurchase program - June 2012 - by six months. [1] The settlement also allows the company to hire an independent consultant who will review the firm's supervisory and compliance policies and procedures solely for non-conventional investments. The St. Louis based company completed its first repurchase of ARS as anticipated in June 2009, and plans to repurchase at par the greater of 10% or $25 thousand of eligible ARS by next month with similar repurchases next December and again in December 2011. [7]
A supplemental repurchase will be made of any ARS remaining after the one in December 2010 for eligible investors who held ARS totaling $150 thousand or less as of January 1, 2009. Stifel said that its investors who bought ARS through the company before the collapse of the ARS market on February 13, 2008 and continue to hold the ARS are eligible to participate in the repurchase program. [7] Stifel will take an assignment of clients' actionable legal claims against the major ARS market participants for the amounts repurchased. All of Stifel's retail investors who bought ARS through Stifel prior to the collapse of the ARS market in early 2008 and continued to hold those ARS at Stifel are eligible to participate in the repurchase program. [1]
Employee accounts become eligible in the last phase of the plan. Since the extraordinary collapse of the ARS market on February 13, 2008, Stifel has been addressing the liquidity needs of its clients. Today's announcement is a significant enhancement over the voluntary plan announced February 11 and reflects Stifel's ongoing efforts to help its clients address the collapse of a market that functioned effectively for more than 20 years. "We are pleased to be able to accelerate and further enhance our voluntary plan to repurchase ARS that we started earlier this year and at the same time resolve all issues with NASAA. We especially appreciate the efforts of the Missouri Secretary of State and her staff for their willingness to work with us and create a solution that works well for all involved," Stifel Chairman and CEO Ronald J. Kruszewski said. [1] "Since the collapse of the ARS market, issuer redemptions and restructurings as well as Stifel's voluntary repurchase plan have resulted in significant liquidity for many of our clients, reducing retail client holdings by nearly 50 percent. This accelerated and enhanced plan will ultimately provide liquidity to 100 percent of our ARS retail clients, about 1,200 in number, who represent less than one-half of one percent of all Stifel retail accounts," Mr. Kruszewski said. [1]
The buyback is being added to the company's current stock repurchase plan, which still has $1.2 billion in funds remaining. In a note to clients Thursday, Stifel analyst Drew Crum said he expects LeapFrog shares to head higher as the company continues to cut costs and shifts to software with higher profit margins. [4]
Stifel Financial Co. will speed up its repurchase of auction rate securities under a settlement reached with Missouri Secretary of State Robin Carnahan. The settlement will bring earlier relief for hundreds of Stifel customers who have been stuck with securities that they can't sell. [6] Dec 28 (Reuters) - Investment bank Stifel Financial Corp ( SF.N ) said its brokerage unit will accelerate repurchase of auction rate securities (ARS) under a deal with state regulators. [5]
The auction rate market collapsed in February 2008, as the financial crisis was building, and owners have been unable to sell the securities since. In her civil suit, Carnahan charged that Stifel misled consumers about the nature of the investments. [6]
About 1,200 Stifel customers owned auction rate securities last year. The issuers of the securities have since redeemed some of them. [6]
The securities, which are held at Stifel Nicolaus & Co Inc by the company's retail investors, will be repurchased by December 2011, six months earlier than previously planned, the company said. [5] Stifel Nicolaus provides securities brokerage, investment banking, trading, investment advisory, and related financial services, primarily, to individual investors, professional money managers, businesses, and municipalities. [1]
Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis. It operates 295 offices in 42 states and the District of Columbia through its principal subsidiary, Stifel, Nicolaus & Company, Incorporated, and 3 European offices through Stifel Nicolaus Limited. [1]
Stifel also agreed to pay a $525,000 fine to Missouri and other states that participated in the settlement, along with $250,000 to Missouri and $25,000 to Indiana to cover investigative and legal costs. The firm will also hire an independent consultant to review its policies for unconventional investments. [6] Stifel and Missouri Secretary of State Robin Carnahan said Monday the St. Louis-based firm will return up to $41 million to investors by the end of 2010, with everyone to be paid in full by the end of 2011. [4] Missouri Secretary of State Robin Carnahan said 1,200 Stifel clients nationwide are owed a total of $180 million. [2]
Carnahan called that inadequate and filed suit. In a Monday news release, Stifel CEO Ron Kruszewski extended an olive branch to Carnahan, the state's main securities regulator, lauding her "willingness to work with us and create a solution that works well for all involved." [6] Partial payments will be made to investors as early as Jan. 15, said Carnahan, who oversees securities in the state. "This is a win for investors, and we're pleased to have helped investors get their money back a lot sooner," she said. [2] Carnahan claims brokers told investors that the investments were "as safe as cash," "100 percent liquid" and "the same as money market funds." [6]
The settlement also ends a nasty, public spat between St. Louis' third-largest brokerage and Carnahan, who is the likely Democratic nominee for U.S. Senate next year. Carnahan had sued the firm, claiming that clients were misled into buying an investment they thought was safe. [6]
Stifel said the settlement requires it to hire an independent consultant to review the company's supervisory and compliance policies and procedures for non-conventional investments. [5] Stifel noted that as per the settlement, the states will share a fine amounting to $525 thousand. [7]
The Indiana Securities Division of Rokita's office filed an administrative complaint against Stifel in October, alleging securities fraud, failure to properly supervise and train salespeople, and that the investments were not suitable for Stifel's customers. [3] The complaint alleged that Stifel failed to disclose the risks associated with auction-rate securities. [3]
Stifel blamed the mess on the larger firms that ran the auction-rate market. Those big players knew the market was weakening, but failed to warn smaller firms such as Stifel, which kept selling the investments to clients. [6] Bowing to pressure, Stifel last March announced a plan to buy back the investment over three years if financial conditions allowed. [6]
SOURCES
1. Stifel Financial Announces Accelerated Plan to Repurchase 100 Percent of Retail Clients' Auction Rate Securities
2. Stifel Reaches Auction-Rate Securities Settlement - ABC News
3. Stifel, Rokita broker auction-rate settlement | Indianapolis Business Journal | IBJ.com
4. St. Louis financial services firm Stifel Nicolaus to accelerate buyback of securities
5. UPDATE 1-Regulators ask Stifel to accelerate ARS buyback | Reuters
6. Stifel settles with state on auction rate securities - STLtoday.com
7. Stifel Financial Details ARS Repurchase Plan - Update
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