– The Office of the Attorney General
through its Bureau of Securities has signed
a final Consent Order that requires Stifel
Nicolaus & Company, Inc., to repurchase
auction-rate securities (ARS) from New Jersey
clients to settle allegations that the firm’s
securities dealers sold ARS without disclosing
known risks of the ARS market.
Under the terms of the settlement, Stifel
Nicolaus will repurchase $5.4 million in
ARS sold to retail investors in New Jersey.
Although marketed and sold to investors
as safe, liquid, and cash-like investments,
the ARS were actually long-term investments
subject to a complex auction process that
failed in early 2008, revealing illiquidity
and lower interest rates than investors
is the seventh such settlement that the
Bureau has reached with firms that sold
Auction Rate Securities to New Jersey investors.
More than $1 billion of these assets have
been repurchased by the firms, under terms
of the settlements.
through no fault of their own, suffered
because of a lack of disclosure by these
firms,” said Thomas R. Calcagni, Acting
Director of the Division of Consumer Affairs.
“Disclosure of material facts to clients
is required by our state laws and we will
act, as we’ve done here, when firms
fail to comply.”
Bureau of Securities continues to seek relief
for investors stuck with these unsuitable
and illiquid products,” said Marc
B. Minor, New Jersey Bureau of Securities
Chief. “State securities regulators
joined forces to resolve this matter on
behalf of New Jersey investors. The states
are on the frontlines in protecting investors
and their hard-earned savings.”
The order also requires Stifel Nicolaus
to pay a $15,381.10 civil penalty to New
Jersey. This amount represents the state’s
pro-rata share of a settlement negotiated
by a multi-state task force of state regulators
formed by the North American Securities
Administrators Association (NASAA).
the investigation, regulators discovered
that Stifel Nicolaus securities dealers
failed to adequately inform customers on
the risks associated with buying auction-rate
The investigation into Stifel Nicolaus’
role in the sale of auction rate securities
is part of a larger state-led effort to
address problems in connection with ARS
investments. Early in 2008, state offices
began receiving complaints from investors
throughout the country. As a result, 12
states, including New Jersey, formed a task
force to investigate whether certain Wall
Street firms had systematically misled investors
when placing them in auction rate securities.
The Consent Order sets forth the allegations
by the BOS and the terms that were agreed
to in principle in October, 2008.
BOS Investigating Attorney Peter C. Cole
led New Jersey’s efforts in securing
this settlement and protecting Garden State
Bureau of Securities can be contacted toll-free
within New Jersey at 1-877-I-INVEST
(1-877-446-8378) or from outside New Jersey
at 973-504-3600. The Bureau's
web site is located at www.njsecurities.gov.