(The news featured below is a selection from the news covered in Federal Securities Law Reporter, which is distributed to subscribers of Federal Securities Law Reporter.)

Firm Charged with Violations in Auction Sales

A brokerage firm that underwrote and managed a limited number of auctions for auction rate securities settled SEC charges that it intervened in auctions by bidding for its proprietary account to prevent "failed" auctions without adequate disclosure in violation of Section 17(a)(2) of the Securities Act. The Commission censured the firm and imposed a $200,000 civil penalty.

"Failed" auctions occur when there are more securities for sale than there are bids for securities and result in an above-market rate described in the disclosure documents. As alleged, the firm submitted bids to ensure that all of the securities would be purchased to avoid failed auctions and thereby, in certain instances, affected the clearing rate. In those instances when this practice lowered the clearing rate, investors received a lower rate of return on their investments.

Release No. 34-55712 will be published in a forthcoming Report.