Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, May 27, 2008

Broker-Dealer Settles Charges It Intervened in ARS Auctions

The SEC settled administrative proceedings against broker-dealer First Southwest Co., which, as part of its broker-dealer business, underwrote and managed a limited number of auctions for auction rate securities.  The SEC alleged that the firm had, without adequate disclosure, intervened in auctions by bidding for its proprietary account to prevent failed auctions and all-hold auctions, and, in some instances, the intervention affected the clearing rate.  In assessing a civil penalty of $150,000, the SEC noted that it considered the firm's cooperation in the investigation and its relatively small share of the auction rate securities markets.  It also considered, however, that the firm did not self-report the practices to the SEC.

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