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Stifel, Nicolaus' Indy office faces fraud charges
By John Russell
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(October 2, 2009 - Friday) - As a result, the investments have been frozen, and it is unclear whether the investors will be able to recover any of their money, despite being told the investment carried little or no risk and could be redeemed within weeks.
The firm is charged with securities fraud, failing to supervise and train employees, and selling unsuitable products, according to an administrative complaint filed Thursday by the Indiana secretary of state's office.
Of the 141 people who invested, 92 were clients of Jeffrey Cohen, managing director of the office. Cohen is also a member of the Indiana University-Purdue University Indianapolis board of advisers and a trustee for Park Tudor School.
According to the complaint, Cohen said he did not receive any special training on the securities in question, had no knowledge of auction failures and did not disclose any risks because "most of the clients in the real world don't want to hear, you know, every single risk factor."
He could not be reached for comment at his office. Branch manager Deborah Baker declined to comment. None of the investors was identified.
The complaint also said several other brokerage employees had little knowledge of how the securities were structured.
The securities involved are known as auction rate securities, long-term investments subject to a complex auction process that collapsed in early 2008, leading to illiquidity, meaning investors could no longer access their funds.
Yet brokers marketed and sold the securities as safe, liquid and cash like investments, according to the complaint.
"Today, we are holding Stifel, Nicolaus & Co. accountable for putting Indiana investors at unnecessary risk," Secretary of State Todd Rokita said in a statement.
The Colorado Division of Securities filed similar action against the brokerage's offices in that state.
The brokerage's headquarters are in St. Louis. Officials there did not return several calls seeking comment.
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