Wachovia said Monday its securities unit and affiliates have received inquiries and subpoenas from federal and state regulators over auction-rate...
CHARLOTTE, N.C. — Wachovia said Monday its securities unit and affiliates have received inquiries and subpoenas from federal and state regulators over auction-rate securities.
The Charlotte-based bank also trimmed a write-down related to an insurance portfolio by $1 million, reducing its total loss in the first quarter to $707 million.
Wachovia made the disclosures in a regulatory filing with the Securities and Exchange Commission (SEC).
Its shares rose 59 cents, or 2.1 percent, to $28.22 in trading Monday.
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Wachovia said the SEC and other regulators are seeking information concerning the underwriting, sale and subsequent auctions of municipal auction-rate securities and auction-rate preferred securities.
The interest rates on such securities are reset at regular auctions. Troubles have arisen as rates fall and demand for some high-rate securities dries up.
“Further review and inquiry is anticipated by the regulatory authorities and Wachovia will cooperate fully,” the company said in the filing.
According to the filing, the bank and Wachovia Securities have also been named in a lawsuit filed in March in New York.
The lawsuit seeks class-action status for customers who purchased and continue to hold such securities based on alleged misrepresentations concerning the quality, risk and characteristics of the securities. The bank said it “intends to vigorously defend the civil litigation.”
Meanwhile, Wachovia Chief Executive Ken Thompson tried to reassure investors at a conference in New York, saying recent negative news about his bank “gives the perception that Wachovia is a company in crisis,” but adding “that is not the situation at all.”
He said the bank is taking steps to fix a recent spate of regulatory and other issues, including hiring a third-party firm to analyze its financial controls and risk-management practices. The review could take three to four months, Thompson said.
Thompson is under fire for Wachovia’s earnings problems and stock slide.
In April, the bank announced a 41 percent cut in its dividend.
And over the past month, the bank reached a $144 million regulatory settlement related to telemarketers who took advantage of thousands of elderly consumers and said it may take an after-tax charge of between $800 million and $1 billion in the second quarter tied to past transactions, which involved lease-to-service contracts and leases of technological equipment.
Last week, Wachovia stripped Thompson of his title as chairman and named board member Lanty Smith as nonexecutive chairman. Thompson remains CEO.
Separately on Monday, Wachovia said Jane Sherburne will succeed retiring Mark Treanor as general counsel later this summer.
Sherburne, now general counsel for Citigroup’s global consumer group, will lead Wachovia’s legal division as well as the company’s government-relations department.