Commerce reaches settlement for auction-rate securities

Commerce Brokerage Securities Inc. has reached a settlement with Secretary of State Robin Carnahan's office to resolve complaints from investors whose money was tied up in auction-rate securities.

The company, an affiliate of Kansas City-based Commerce Bank, announced in August that it would buy back $545 million in auction-rate securities held by its 140 investors, a process that has been completed, according to a news release from Carnahan's office. The investors had purchased the long-term bonds but could no longer sell them at auction after the economy weakened earlier this year.

The Secretary of State's office had launched a full-scale investigation into Commerce and other firms when investors filed formal complaints, the release said. In August, a similar settlement was reached with Wachovia Securities; Wachovia paid about $9 billion to more than 40,000 investors.

The settlement with Commerce states that the company "failed to adequately supervise its agents who improperly sold auction-rate securities to investors," the release said.

Commerce has agreed to pay $500,000 to the Missouri Investor Education and Protection Fund and to hire a consultant to analyze the brokerage's supervisory and compliance policies for unconventional investments. The company also will participate in a special arbitration process for investors who suffered a loss when they were unable to access their money.