Securities News Releases

Thursday, May 14, 2009
Contact: Laura Egerdal, (573) 526-0949
Contact: Ryan Hobart, (573) 526-4734

Carnahan Finalizes $400 Million Bank of America Auction Rate Securities Settlement

Stifel Inaction Prompts Another State Lawsuit

- Secretary of State Robin Carnahan announced today that her office finalized a settlement with Bank of America that provides relief for Missouri investors stuck with over $400 million in auction rate securities since that market failed in February 2008.

Under the consent order, Bank of America finalized its repurchase of auction rate securities held by its Missouri individual and small business clients, which was completed earlier this year. The order also provides other important relief for Missouri investors and orders Bank of America to pay $1.4 million to the Missouri Investor Education and Protection Fund.

"Bank of America did the right thing by giving investors immediate access to our money," said David LaMothe, an investor from Kansas City, Mo.  "My broker told me that this was a guaranteed, liquid investment, so I was shocked to learn we had actually purchased long term bonds.  I simply couldn’t wait years to get the access to my money that I was promised."

The Bank of America order is in contrast to the inadequate offer that Stifel Nicolaus has made to its auction rate securities customers. In March, Carnahan filed a civil action against Stifel Nicolaus for violation of securities laws. Stifel has announced a drawn-out buyback plan for its auction rate securities customers. Under the latest Stifel repurchase plan, many investors won’t receive full access to their money until 2012.

"While it is encouraging that firms like Bank of America understand the need to provide relief to investors, I am disappointed that Stifel doesn't feel its clients deserve the same," said Carnahan. "Stifel customers should not have to wait over three years for relief that so many other firms have already provided to their clients immediately."

Stifel is also now facing a regulatory action in another state. The Virginia Division of Securities and Retail Financing is alleging that Stifel engaged in dishonest and unethical business practices in its sale of approximately $8.4 million of auction rate securities to Virginia investors. The Virginia regulatory action also alleges that Stifel failed to supervise its agents and engaged in a fraudulent course of business.

Carnahan expects to finalize auction rate securities settlements with several other firms over the next few months, and will continue to fight for investor relief and to hold firms accountable in all auction rate securities cases that have not been resolved.  

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