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Stifel, Nicolaus and Ex- Executive to Pay $25Mn & Admit Wrongdoing in Sale of Synthetic CDOs - SEC
St. Louis, MO-based broker-dealer, Stifel, Nicolaus and former SVP President David Noack agreed to admit wrongdoing and pay $24.5 million in disgorgement, fines and prejudgment interest to settle SEC charges involving the sale of synthetic collateralized debt obligations (CDOs) to 5 Wisconsin school districts.
According to the SEC, Stifel and Noack harmed 5 Wisconsin school districts by selling them $200 million in unsuitably risky and complex synthetic CDOs funded largely with borrowed money. Ultimately, the synthetic CDOs failed and the school districts suffered a complete loss of their cash investment.
Distributions to the school districts, along with the prior Fair Fund distribution of $30.4 million in a related case instituted in September 2011 and settlements obtained in the school districts' private lawsuit, will fully compensate the 5 Wisconsin school districts for their losses.
Judge Charles Clevert, Jr. also recites Stifel's and Noack's admissions to misconduct that harmed the Wisconsin school districts. In the final judgment, Stifel and Noack admitted, among other things, that they made certain material misstatements to the school districts that overstated the safety and downplayed the risks of investing in CDOs, and failed to disclose certain material facts, and did not independently perform any meaningful suitability analysis with respect to the CDO investments.
Noack also has consented to the entry of an SEC order, based on the court's entry of judgment, which imposes industry and penny stock bars, with the right to reapply after five years.
