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Stifel Financial Corp. Message Board

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  • shortmomo shortmomo Aug 10, 2011 11:54 AM Flag

    sec charges sf with fraud

    SEC Charges Stifel With Fraud On Wis. School District Sales
    Last update: 8/10/2011 11:46:15 AM
    DOW JONES NEWSWIRES
    The Securities and Exchange Commission has charged brokerage firm Stifel Financial Corp. (SF) and a former senior executive with alleged fraud on sales to five Wisconsin school districts.
    According to a complaint filed in federal court in Milwaukee, the SEC alleges the owner of Stifel Nicolaus & Co. and senior vice president David W. Noack misrepresented the risk of $200 million in collateralized debt obligations sold to the districts, paid for largely with borrowed funds in three transactions in 2006.
    Stifel Nicolaus, which offers security brokerage, investment banking and other money management services, created a proprietary program to help the school districts fund retiree benefits by investing in notes linked to the performance of the CDOs. The investments failed, but generated significant fees for Stifel and Noack, the filing said.
    The SEC alleges that Stifel and Noack told the school districts, which had no previous experience investing in CDOs, said it would take "15 Enrons" for the investments to fail. They allegedly failed to disclose the portfolio in the first transaction performing poorly from the outset, credit rating agencies placing 10% of the portfolio on negative each within 36 days of closing and certain CDO providers expressing concerns about the risk of Stifel's proprietary program.
    The districts borrowed $162.7 million and used $37.3 million in their own funds to purchase the CDOs from the Royal Bank of Canada (RY, RY.T) with the advice of Stifel.
    In April, Stifel disclosed it received a Wells notice relating to the company's role in the investments. The SEC began investigating the sale last year.
    A Stifel spokesman was not immediately available for comment.

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