Securities News Releases

Thursday, July 17, 2008
Contact: Ryan Hobart, (573) 526-4734

Carnahan Leads Special Inspection of Wachovia Securities

National Task Force Investigates Auction Rate Securities Meltdown

– Officials from Secretary of State Robin Carnahan’s Securities Division conducted a special inspection at Wachovia Securities headquarters, formerly A.G. Edwards, in downtown St. Louis today concerning the $330 billion auction rate securities meltdown.

A team of ten securities regulators from Missouri, Illinois, Massachusetts, New Jersey, Pennsylvania and other states entered Wachovia Securities’ headquarters seeking documents and records. The inspection sought information concerning Wachovia Securities’ sales practices, internal evaluations of the auction rate securities market and marketing strategies. Carnahan’s office has also served subpoenas on over a dozen Wachovia Securities agents and executives to gather more information.

Sixty year old business owner, Tom Nagel, purchased auction rate securities through Wachovia in 2005. “My broker of 20 years assured me that this was the same as a money market and that I could get my retirement funds back at any time,” said Nagel. “My wife’s health recently declined and because of the medical bills along with a trip to see a doctor from the Mayo Clinic, I was in desperate need of cash. But when I called my broker, he said those funds were frozen. I was then told by a supervisor that I could no longer talk to my broker.”

More than 70 formal complaints on auction rate securities were filed with the Missouri Securities Division over the last four months, representing over $40 million of frozen investments. This is the most complaints received on a single issue during Secretary Carnahan’s administration. In April, the Securities Division launched a full-scale investigation, requesting documents, emails, transcripts and other records from Wachovia Securities and other banks. Wachovia Securities has not fully complied with these requests, prompting today’s onsite inspection.

“Hundreds of Missouri investors have called my office because of inability to access their money. They were told these investments were safe and easy to cash in, but now they cannot run their business, make medical payments, or pay school tuition,” Carnahan stated, “Our office is doing all we can to find solutions that will make these investors whole.”

The Missouri Securities Division is also reviewing the fraud complaint filed against UBS Securities by Massachusetts regulators late last month and is conducting simultaneous investigations into auction rate securities complaints on other firms, including Commerce Bank N.A. and Stifel, Nicolaus & Company, Incorporated. Investors who are unable to access their investment funds as promised can call the Missouri Securities Division at their toll-free hotline at (800) 721-7996 to file a complaint.

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