SEC recommends action against bank over $200 million school investments

Amy Hetzner:

School officials in Kenosha, Kimberly, Waukesha, West Allis-West Milwaukee and Whitefish Bay claim they were misled about the nature of the investments

Securities and Exchange Commission staff have recommended taking enforcement action against an investment bank involved in five Wisconsin school districts' $200 million investment in risky financial instruments, the bank disclosed Friday.

The parent corporation for Stifel, Nicolaus & Co. Inc. disclosed in an SEC filling that Stifel Nicolaus had received a "Wells Notice" from the federal agency on Friday, indicating that "the staff intends to recommend the filing of a civil or administrative enforcement action against Stifel Nicolaus for possible violations of securities laws related to its role" in the school districts' investments.

"Stifel Nicolaus plans to respond and explain why it believes enforcement action is not warranted," the company wrote in the filing.

Bankers with Stifel Nicolaus helped sell $200 million worth of complex financial instruments known as collateralized debt obligations in 2006 to five school districts - Kenosha, Kimberly, Waukesha, West Allis-West Milwaukee and Whitefish Bay - as a way to help fund non-pension post-employment benefits for the districts' employees.

Posted by Jim Zellmer at April 4, 2011 1:04 AM
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