State AG reaches securities settlement with Stifel Nicolaus

As part of a continuing effort by the Missouri Attorney General's Office, St. Louis-based Stifel, Nicolaus & Co. Inc. has agreed to accelerate its planned schedule to buy back auction-rate securities from customers whose money was made inaccessible by the 2008 collapse in the securities market.

Under the terms of a settlement announced Monday, the financial services firm will make partial payouts to all customers by Jan. 15, and all investors with $150,000 or less in securities will be paid back completely by December 2010 - an estimated $41 million in total. Remaining investors will be repaid fully by the end of 2011.

The settlement was made with the attorneys general of Missouri and Indiana.

According to a news release from Secretary of State Robin Carnahan's office, investors had been sold the securities with the understanding that they were nearly as liquid as cash, giving them quick access to their money if needed. But when the auction-rate market collapsed in February 2008 and investment firms were no longer willing to buy the securities on the auction market, investors were unable to access their money.

"We are pleased to be able to accelerate and further enhance our voluntary plan to repurchase ARS that we started earlier this year," Stifel Chairman and CEO Ronald J. Kruszewski said in a company release. "We especially appreciate the efforts of the Missouri secretary of state and her staff for their willingness to work with us and create a solution that works well for all involved."

The terms of the agreement also require the firm to work with a bank affiliate to offer investor-friendly loans to customers needing immediate cash. The company will also pay a penalty of $525,000 and costs incurred by the states involved.

"With this settlement, 90 percent of Missourians and 80 percent of Stifel customers nationwide will be made whole by the end of 2010, many of them a year and half ahead of Stifel's original buy-back offer," Carnahan said in a news release.

Stifel Nicolaus is the 12th firm to reach an agreement with Carnahan's Securities Division relating to auction-rate securities, leading to more than $10 billion in investments being returned.