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Secretary of State

SOS > Media Center >  Press Releases > Indiana Securities Division agreement with Stifel, Nicolaus & Company will accelerate return of investments to Indiana investors and establish outside review of company’s sales practices Indiana Securities Division agreement with Stifel, Nicolaus & Company will accelerate return of investments to Indiana investors and establish outside review of company’s sales practices

FOR IMMEDIATE RELEASE
December 28, 2009

Indiana Secretary of State Todd Rokita announces terms of global agreement; Company agrees to immediate payments to investors in January 2010 with complete buy backs by end of 2011

(Indianapolis) – Indiana residents who purchased auction rate securities from Stifel, Nicolaus and Company (Stifel) will regain complete access to their investments within the next 24 months under an agreement announced today by Indiana Secretary of State Todd Rokita. The agreement, signed today by Indiana Securities Commissioner Chris Naylor is part of a global settlement coordinated through the North American Securities Administrators Association (NASAA) that will also provide relief to investors across the nation, including Stifel’s home state of Missouri.

“I am pleased that by taking swift, decisive action against Stifel, Nicolaus and Company, we have been able to drive toward a settlement that speeds up the return of money to Indiana investors who were put at unnecessary risk,” said Secretary Rokita. “This agreement also adds investor protection by requiring Stifel to take additional action to review its compliance policies and procedures.”

In October, Secretary Rokita’s Indiana Securities Division filed an administrative complaint against Stifel alleging securities fraud, failure to properly supervise and train sales people and that the investments were not suitable for Stifel’s customers. The complaint alleged that Stifel failed to disclose risks associated with the sale of auction rate securities to Indiana investors. With approximately $54 million invested by its residents, Indiana was the largest state in terms of dollars invested with Stifel in the auction rate securities market.

Although marketed and sold to investors as safe, liquid and cash-like investments, auction rate securities are actually long-term investments subject to a complex Dutch auction process that would allow the investments to be sold. In February 2008 the auction process collapsed, leading to illiquidity – meaning investors could no longer access their invested funds.

Under the settlement agreement, Stifel will repurchase from each eligible investor the greater of $25,000 or 10 percent of remaining auction rate securities holdings no later than January 15, 2010. Stifel will continue making accelerated payments to investors over the next two years, with all Stifel investors who had $150,000 or less tied up in the auction rate securities market made whole by December 31, 2010, and all remaining investors regaining complete control of their investments by the end of 2011. Under the terms of Stifel’s previous buy back agreement given to investors by Stifel, many investors would not be made whole until June 2012.

Under the agreement, Stifel also agrees to hire an outside consultant to review and make recommendations about the company’s internal supervisory and compliance policies and procedures relating to the sale of non-conventional investments through its network of branch offices.

"Secretary Rokita and his Indiana Securities Division deserve the praise of investors in Indiana and elsewhere for working to ensure a meaningful settlement that puts investors first,” said Denise Voigt Crawford, President of NASAA and Texas Securities Commissioner.

Indiana served as a lead state on the NASAA task force on auction rate securities that specifically addressed Stifel.

Media Contact: Jim Gavin, 317.233.8655, jgavin@sos.in.gov

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