WASHINGTON - The Securities and Exchange Commission enforcement staff has notified Wachovia Bank NA that they may recommend the SEC file charges against it as a result of an investigation of alleged anti-competitive bidding practices in municipal derivatives and investment products.
Wachovia Corp. disclosed the SEC warning in the 10-Q quarterly financial statement it filed with the commission yesterday.
The firm said in the filing that it "has been informed that in connection with the bidding of various financial instruments associated with municipal securities, the staff of the Securities and Exchange Commission is considering recommending that the commission institute civil and/or administrative proceedings against" it.
Though the notice does not explicitly state that the SEC sent the firm a "Wells Notice," a spokeswoman confirmed that the firm received one. A Wells Notice typically gives the recipient the opportunity to respond to the charges in writing or verbally within a certain period of time and to try to talk the staff out of filing them.
Wachovia joins several other firms that have disclosed they have received Wells notices from the SEC with regard to this investigation, including Bear, Stearns & Co., Bank of America NA, Financial Security Assurance Holdings Ltd., whose parent is Dexia SA, and UBS Securities LLC. In addition, General Electric Co. disclosed late last month that a subsidiary, GE Funding Capital Markets Services Inc., received a Wells Notice.
The SEC has been conducting a civil investigation of alleged bid-rigging and anti-competitive activities associated with guaranteed investment contracts and derivatives since November 2006. The investigation is parallel to a criminal antitrust probe of such activities that is being conducted by the Justice Department. In recent months, more than a dozen current and former broker-dealers have been notified by the Justice Department that they are targets of a grand jury investigation ongoing in New York City.
In yesterday's 10-Q, Wachovia also disclosed that it has received subpoenas from "various state attorneys general regarding these matters," and that it is "cooperating with the government investigations."
State attorneys general are conducting a coordinated investigation of anti-competitive practices in the municipal market that closely mirrors the SEC and Justice probes. The multi-state attorneys general investigation includes Florida's Bill McCollum and Connecticut's Richard Blumenthal, and was first publicly disclosed by XL Capital Ltd. in a 10-K financial statement filed with the SEC.
McCollum's office has said it has subpoenaed at least 38 broker-dealers, investment advisory companies, and other firms as part of the investigation.