CORRECT: Thomas Weisel Sets Aside $4 Million For Auction-Rate Fine -Filing
March 16 2010 - 6:35PM
Dow Jones News
Thomas Weisel Partners Group (TWPG) has set aside $4 million to
pay an expected fine by the Financial Industry Regulatory Authority
to settle an investigation involving auction-rate securities, the
company said in a regulatory filing. Weisel said in the filing the
fine could "adversely" affect the firm.
The company said it "believes that it has reached an
understanding in principle" with Finra on the fine, which "would
resolve all aspects of the investigation of the company."
The company didn't return a call seeking comment.
In July, the staff of Finra, Wall Street's self-regulatory
organization, recommended disciplinary action against Thomas Weisel
regarding certain activities "involving potential violations of
FINRA and Municipal Securities Rulemaking Board rules and certain
anti-fraud" provisions, according to the 10-K, which was filed
March 12.
Thomas Weisel, a San-Francisco-based investment bank, indicated
in the 10-K that the "regulatory and legal developments related to
auction-rate securities could adversely affect our business,
financial conditions, operations and cash flow."
The auction-rate securities market collapsed about two years
ago, essentially leaving investors stuck with illiquid investments.
Investors, outraged over the misrepresentation of ARS by financial
advisers as low-risk investments, could not sell the securities or
had to take a loss.
Over the past few years, large Wall Street firms, such as
Citigroup Inc. (C) and UBS AG (UBS), pushed by regulators, agreed
to buy back billions of ARS.
Weisel said it didn't underwrite auction rate securities, or
manage the auctions for them, but was an agent for customers buying
the securities. The company also said customers or Finra could
force it to purchase the securities from customers, "although we do
not have sufficient regulatory capital nor do we have cash or
borrowing capacity to repurchase all of the ARS held by those
customers." Weisel said it's exploring potential solutions.
The $4 million fine is a comparatively large amount for Finra.
Matt Farley, partner at law firm Drinker Biddle & Reath, said
he's observed that big fines by Finra, instead of restitution, can
mean the regulator was troubled by what it found during the Thomas
Weisel investigation.
Jacob Zamansky of Zamansky & Associates said "it is a
significant fine for a small downstream player in the auction-rate
securities market such as Thomas Weisel."
-By Jessica Papini, Dow Jones Newswires; 212-416-2172;
jessica.papini@dowjones.com
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