Investment firm Stifel, Nicolaus & Co. probably will not lose its state securities license over complaints it sold auction-rate securities that later went bad, according to the acting director of the Colorado Department of Regulatory Agencies.
The state Division of Securities, an arm of DORA, threatened to revoke, suspend or modify the firm’s license in a complaint filed in October.
“Based on what we know today, it is a possible outcome, not a likely outcome,” DORA director Greg Ferland said of the revocation or suspension options. Ferland said a modification of the firm’s license was the most-likely scenario.
The securities division alleges that the firm sold auction-rate securities to clients as a safe and liquid alternative. But those securities became illiquid when the auction-rate markets froze up in February 2008.
Regulators in several states have pushed firms that sold them to make investors whole.
“Stifel, Nicolaus takes seriously all regulatory issues and actions,” said Steve Bell, director of public finance at the firm’s Denver office. “But we have never considered license revocation or suspension to be merited or plausible, given the facts of this matter.”
Stifel has asked the state to amend the complaint, which Ferland said he refused to do.
“We really want to encourage the company to sit down with the Division of Securities and resolve this case,” Ferland said.
The company said its intent is to resolve the issue.
“We will be working to expeditiously address and resolve the matter before the commission,” Bell said. “With that threat (of revocation) off the table, we look forward to redoubling our commitment to providing the highest level of professionalism and service to our clients across Colorado.”
If negotiations fail, an administrative law judge will make recommendations on the complaint to state securities commissioner Fred Joseph, who decides the outcome and penalty.
Stifel, in its response to the state’s complaint, argues it had no way of knowing that auction-rate markets, after operating smoothly for two decades, would fail suddenly.
Unlike larger firms, which supported auctions when buyers didn’t show up, Stifel didn’t intervene. Of 68 Colorado clients who bought the securities, all have agreed to a repurchase plan, and only 26 remain who haven’t been paid in full, the firm said. They will be paid over time.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
