When a good old-fashioned short squeeze is on, and one is on, see SEC Restricts Shorting 19 Financial Stocks and Selective Enforcement of Regulation SHO for more information, some things that might ordinarily matter, simply don’t matter.
Perhaps this is a big deal, and perhaps not, but stocks such as Wachovia (WB) typically do not soar 27% in the face of news like Wachovia Securities hit with inspection in probe.
Securities regulators from six U.S. states mounted a surprise inspection Thursday of the headquarters of Wachovia Corp’s (WB) brokerage affiliate, as part of a probe into the firm’s sales of auction-rate debt.
The office of Missouri Secretary of State Robin Carnahan said a team of 10 regulators went to the St. Louis headquarters of Wachovia Securities, seeking information about sales practices, internal evaluations of the auction-rate securities market and marketing strategies.
The move came after Wachovia Securities failed to comply with information requests from Missouri securities regulators, state officials said. More than a dozen subpoenas were also issued, according to the state.
Missouri said it subpoenaed more than a dozen Wachovia Securities agents and executives after receiving more than 70 complaints over four months, concerning in excess of $40 million in frozen investments.
Wachovia owns 62 percent of Wachovia Securities. Prudential Financial Inc (PRU) owns the remainder. The St. Louis headquarters were known as A.G. Edwards Inc before Wachovia acquired it last October 1.
“What’s scary is this is one more piece of evidence that Wachovia may have ignored the best interest of its customers, although this could have gone on before Wachovia bought A.G. Edwards,” said Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte. “It erodes the company’s reputational capital even more in the eyes of its customers. It’s more news the company doesn’t need.”
Mike “Mish” Shedlock
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