Stifel Financial Corp says that subsidiary Stifel Nicolaus & Co. Inc. will buy back all of its customers’ auction-rate securities in the next three years. This is a significant change from its initial offer to purchase 10% of the clients’ ARS holdings.
The ARS repurchase will occur in four stages:
• By June 30, 2009: $25,000 or 10% (whichever is greater).
• Before June 30, 2010, $25,000 or 10% (whichever is greater).
• Prior to June 30, 2011, $25,000 or 10% (whichever is greater).
• Prior to June 30, 2012, the balance of any outstanding ARS.
Employee accounts, however, are only eligible once the last phase of the enhanced plan begins.
Stifel CEO & Chairman Ronald J. Kruszewski says the plan reflects the proper balance between shareholder and client interests. He says the plan will give relief to its 1200 ARS clients and that about 40% of the accounts would be completely liquidated by the end of June 2009.
The repayment offer applies to ARS that are held by retail clients who purchased the securities through Stifel before the ARS market fell. In return, Stifel says it will take assignment of actionable legal claims by customers against the large players in the ARS market for the amounts it buys back. Stifel maintains that it would not have told its clients to purchase ARS if the key market participants had told the financial firm what they knew about the ARS market collapse.
Missouri securities regulator Secretary of State Robin Carnahan, however, is still concerned that this new offer is still not enough to guarantee that customers will get back all their funds. She noted that three years might be too long for many investors and she called on Stifel to guarantee that it would make its investors whole again.
Soon after Stifel’s announcement of its ARS repurchase plan, Carnahan filed a lawsuit against the St. Louis-based financial firm for misleading clients that had purchased ARS.