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State charges Stifel Nicolaus didn't disclose risks of auction-rate securities

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An administrative complaint filed today by the Indiana Secretary of State’s Office alleges securities firm Stifel Nicolaus & Co. committed securities fraud and failed to properly train its sales staff.

The complaint alleges that Stifel Nicolaus failed to disclose risks associated with the sale of auction-rate securities to 141 Hoosiers who invested $54.9 million in the securities.  

Of the total, 92 were clients of Jeffrey Cohen, managing director of the local Stifel office. The state says his clients invested $45 million. Cohen and partner David Knall work with some of the state’s wealthiest investors and oversee billions of dollars in client funds.

Auction-rate securities are debt instruments whose interest rates are meant to be reset regularly at daily, weekly or monthly auctions. Numerous investment firms marketed them as safe, liquid and cash-like investments. But when the auction process collapsed in early 2008, the securities became illiquid—meaning investors could no longer access their invested funds.
 
As a result of the failure of the auction-rate securities market, $54.9 million invested by Indiana residents was frozen, according to the Secretary of State’s Office.

“Today, we are holding Stifel Nicolaus & Co. accountable for putting Indiana investors at unnecessary risk,” Secretary of State Todd Rokita said in a prepared statement. “This action sends a strong message that our state will not tolerate unethical and unlawful behavior and that my office will hold the securities industry accountable for any violations of the securities laws of Indiana.”

The Indiana complaint could result in a fine of $10,000 per violation of the Indiana Securities Act, in addition to restitution for the investors’ funds frozen in the failed auction rate securities market.

Stifel Nicholas is facing similar charges in other states.

Colorado officials filed a similar complaint against the firm today. Indiana investigators and the Colorado Division of Securities worked together and within a multistate task force to develop evidence of the company’s alleged securities violations, Rokita said in the statement.

Also, officials in Missouri accused Stifel of the same charges in March.

Cohen initially was named in the Missouri complaint, but was later dropped. He is a member of IUPUI’s board of advisers and serves as a trustee for Park Tudor School, where he co-chaired its capital campaign that ended last month. He was not immediately available for comment.

Missouri’s lawsuit alleges more than 1,200 Stifel investors were stuck with $180 million in auction-rate securities they couldn’t access for more than a year.

The Missouri lawsuit calls for Stifel to pay immediate restitution with interest to all its clients who purchased auction-rate securities, plus penalties. Missouri also wants Stifel to make payments for investor education and to reimburse its legal costs.

Based in St. Louis, Stifel has 3,300 employees and more than 200 offices in the United States and Europe.



 

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  1. So much for Eric Holder's conversation about race. If white people have got something to say, they get sued over it. Bottom line: white people have un-freer speech than others as a consequence of the misnamed "Civil rights laws."

  2. I agree, having seen three shows, that I was less than wowed. Disappointing!!

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  4. Say It Loud, I'm Black and Ashamed: It's too bad that with certain "black" entertainment events, it seems violence and thuggery follows and the collateral damage that it leaves behinds continues to be a strain on the city in terms of people getting hurt, killed or becoming victims of crimes and/or stretching city resources. I remember shopping in the Meadows area years ago until violence and crime ended make most of the business pack you and leave as did with Lafayette Square and Washington Square. Over the past 10 to 12 years, I remember going to the Indiana Black Expo Soul Picnic in Washington Park. Violence, gang fights and homicides ended that. My great grandmother still bears the scares on her leg from when she was trampled by a group of thugs running from gun fire from a rival gang. With hundreds of police offices downtown still multiple shootings, people getting shot downtown during Black Expo. A number of people getting shots or murdered at black clubs around the city like Club Six on the west side, The Industry downtown, Jamal Tinsley's shot out in front of the Conrad, multiple fights and shootings at the skating rinks, shootings at Circle Center Mall and shooting and robberies and car jackings at Lafayette Mall. Shootings and gang violence and the State Fair. I can go on and on and on. Now Broad Ripple. (Shaking head side to side) Say It Loud, I'm Black and I'm Ashamed.

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