U.S., State Regulators Probe Wachovia’s Auction-Rate Securities

NEW YORK -- Wachovia Corp. confirmed that its Wachovia Securities LLC and other affiliates received inquiries and subpoenas from the Securities and Exchange Commission and several state regulators regarding auction-rate securities, the Wall Street Journal reported.

The financial services firm said the regulators are seeking information concerning the underwriting, sale and subsequent auctions of municipal auction-rate securities and auction-rate preferred securities, according to the newspaper.

Also, Wachovia and Wachovia Securities were named in a lawsuit in New York. The lawsuit seeks class-action status for customers who bought and continue to hold auction-rate securities based upon alleged misrepresentations made with respect to the quality, risk and characteristics of the securities, the Wall Street Journal reported.

The bond market for auction-rate securities has recently experienced significant difficulties caused by decreased demand, failed auctions, unusual interest rates and other challenges, according to the Journal.

-- NYSSCPA.org News Staff

Posted on 5/12/08