Federal and state regulators are questioning both Wachovia (WB) and Piper Jaffray (PJC) for their respective roles in the collapse of the auction rate security market.
The $330 billion market imploded at the end of last year following ongoing turmoil in credit markets. Wachovia has been subpoenaed in an SEC investigation for its role in underwriting and selling the securities. Piper would only say in a recently released filing that it was “cooperating” with investigators. NYT:
Charlotte, North Carolina-based Wachovia also said it was named in a class action suit filed in March in U.S. District Court in Manhattan by holders of the securities. The suit claims the bank misrepresented the quality and risk of the auction rate securities, charges the bank said it would fight.
Sources told Reuters last month that New York’s attorney general and securities regulators in several U.S. states were probing auction-rate securities and the role Wall Street firms in enticing investors into the troubled market.
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