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The final order approved today by the Commission following an investigation into Wachovia's marketing and sales of ARS to Pennsylvania residents also requires Wachovia to pay a $2.52 million assessment to the Commonwealth for its role in the auction rate securities market.
"The Pennsylvania Securities Commission found that Wachovia engaged in unethical or dishonest business practices and failed to supervise its agents for its sale of auction rate securities to investors," Chairman Robert Lam said.
"The Commission's action sends a strong message that Pennsylvania will not tolerate unethical and unlawful behavior in the securities industry," said Commissioner Tom Michlovic.
Commissioner Steven Irwin said Wachovia "marketed and sold these securities as safe, liquid and cash-like investments when, in fact, they were long-term investments subject to a complex auction process that failed in early 2008, leading to illiquidity and lower interest rates for investors."
The Commission estimated that more than 1,300 Pennsylvania retail investors held auction rate securities from Wachovia as of February 2008, shortly before the market collapse. Pursuant to the Commission's order, Wachovia has offered to repurchase the securities from the retail investors.
"From the day these auctions failed in February, 2008, the Pennsylvania Securities Commission has been seeking much-needed relief and liquidity for investors stuck with these securities," Lam said. "I am pleased that Wachovia has agreed to repurchase their retail clients' positions and I expect other firms that sold these securities in Pennsylvania to do the same."
Michlovic noted that the securities commission is continuing its investigation of other firms. "This is a significant and on-going regulatory effort," he said.
Irwin said the Pennsylvania commission appreciated the cooperation provided by the North American Securities Administrators Association (NASAA) and its multi-state task force on auction rate securities and, particularly, securities regulators in Missouri, for helping to bring about the settlement.
Citizens may contact the Pennsylvania Securities Commission, toll-free, at 1-800-600-0007, during normal business hours or on the web at www.psc.state.pa.us.
SOURCE Pennsylvania Securities Commission
http://www.psc.state.pa.us
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