By Adam Allington, KWMU
St. Louis, MO – Missouri Secretary of State Robin Carnahan is suing the St. Louis-based brokerage firm Stifel Nicolaus, accusing the company of misleading customers who bought auction-rate securities.
Carnahan says customers purchased those securities thinking that they were a liquid asset, when it fact the fine print allowed Stifel to freeze securities repayments when the bond market went into freefall last year.
"Wachovia and Commerce have done right by their customers and Stifel hasn't," Carnahan said. "And we certainly don't want Stifel to use this action as another excuse to use their clients holding the bag."
Stifel's parent company has announced plans to buy back $180 million of its illiquid securities over a period of three years. Carnahan says that time frame is not good enough. She's seeking a ruling to provide immediate restitution with interest, as well as penalties and reimbursement to the state for legal and investigative costs.
Stifel calls the lawsuit "ridiculous." Company officials say the brokerage did not manufacture or issue the securities, but merely distributed them, and therefore cannot be held responsible. They say the lawsuit may disrupt the buyback plan.