The SEC is stepping up its inquiry into auction-rate sale of debt issues to institutional investors. While we cannot disclose specific matters, we are looking at representations made to investors when they purchased auction rate securities, in coordination with the Financial Industry Regulatory Authority, said SEC spokesman John Heine, who declined to disclose further details of the inquiry by the SECs Office of Compliance Inspections and Examinations. FINRA oversees about 5,000 brokerage firms in the U.S.
The SEC is pressing its own inquiry as nine states are coordinating efforts to find out whether brokerage firms failed to accurately represent the risk inherent to the debt investments. New York Attorney General Andrew Cuomo has also subpoenaed a number of Wall Street firms on the matter.
For the past two months, investors have failed to find takers at daily auctions for the securities they bought from the brokerage firms.