Wachovia Securities raided in auction rate probe
Thursday July 17, 11:57 am ET
By Carey Gillam
KANSAS CITY, Missouri (Reuters) – Securities regulators from several U.S. states raided the St. Louis headquarters of Wachovia Securities on Thursday as part of a broad investigation into questionable practices involving auction rate securities, Missouri officials said.
Missouri Secretary of State Robin Carnahan’s office said the “special inspection” at the Wachovia Corp (NYSE:WB – News) affiliate, the former A.G. Edwards, concerned the $330 billion auction rate securities meltdown.
It said regulators were looking for information about Wachovia Securities’ sales practices, internal evaluations of the auction rate securities market, and marketing strategies.
A spokeswoman for Wachovia was not immediately able to comment. The bank owns 62 percent of Wachovia Securities and Prudential Financial Inc (NYSE:PRU – News) the remainder.
In addition to securities regulators from Missouri, regulators from Illinois, Massachusetts, New Jersey, Pennsylvania and other states were part of the team entering Wachovia Securities’ headquarters, the officials said.
Missouri has also served subpoenas on more than a dozen Wachovia Securities agents and executives after receiving more than 70 complaints representing more than $40 million in frozen investments over the last four months.
The move on the headquarters comes three months after Wachovia Securities failed to fully comply with requests by the Missouri securities division for certain information, state officials said.
“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 said in a written statement.
The Missouri Securities Division is also reviewing the fraud complaint filed against UBS AG (VTX:UBSN.VX – News) affiliate UBS Securities by Massachusetts regulators late last month and is conducting simultaneous investigations into auction rate securities complaints on other firms.
Wachovia, which has seen its shares slump 75 percent this year, has written off billions of dollars in mortgage-related losses this year. The company named Robert Steel as its chief executive last week after ousting its previous CEO Ken Thompson last month.
(Additional reporting by Dan Wilchins; editing by John Wallace and Gerald E. McCormick)
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