Securities commissioner comments on review of state trading | Arkansas Blog

Saturday, October 29, 2011

Securities commissioner comments on review of state trading

Posted By on Sat, Oct 29, 2011 at 12:04 PM

NEITHER TOTALLY ACCURATE NOR INACCURATE: Thats how securities commissioner characterized a response from this securities firm in Russellville to a question about state bond business.
  • 'NEITHER TOTALLY ACCURATE NOR INACCURATE': That's how securities commissioner characterized a response from this securities firm in Russellville to a question about state bond business.

I wrote more than a week ago that reviews were underway — by legislative audit and the state Securities Department — that might take a look at a subject of discussion in the brokerage community. That would be the large share of State Treasurer Martha Shoffner's bond business — half a billion dollars worth, about a third of total investments with a dozen firms — with a small brokerage firm in Russellville St. Bernard Financial Services.

I wrote then that St. Bernard officials said they'd been assured that the review was routine, as was their tradiing business. It's merely a reflection of good prices and service, they said. Shoffner herself has refused to talk to me. She was snagged by the Democrat-Gazette's Michael Wickline for a story on the same subject this morning. He also got a comment from Securities Commissioner Heath Abshure. That surprised me because I hadn't been able to reach him in multiple attempts. Apparently, our failure to communicate was a phone problem.

In any case, he did respond to my e-mail this morning with an e-mail that inclluded a full copy of his response to the D-G on the question about whether his agency was reviewing the treasurer's trades. It also covered the St. Bernard response. For the record, here's what he wrote to me:

As I am sure you understand, it is the Department’s policy to not comment on any compliance examination, for cause examination, or other investigation. This includes commenting on whether an investigation of any sort does or does not exist.

The only paragraph I feel comfortable commenting on is the following [from St. Bernard]:

The Arkansas Securities Department sent us a letter stating that they were conducting a review of all brokers conducting business with the State. Furthermore, I was reassured that we were not being singled out, as they were reviewing all brokers doing business with the State, and that the review was not as a result of any complaint. We met with them and happily gave them the information they requested.

This paragraph is neither totally accurate nor inaccurate. The Department is not “conducting a review of all brokers conducting business with the State.” As part of our compliance examination program, we are reviewing certain transactions by broker-dealer firms that transact securities business with certain state agencies or departments. A compliance examination is akin to an audit. We are auditing multiple firms, and looking at samples of transactions from those firms. It is inaccurate to imply that we are “reviewing” every broker that conducts business with every account of every state entity.

As you can see, my response was to correct a statement regarding the Department’s actions.

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