Districts to see $30.4 million from investment firm charged by SEC

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Sept. 27, 2011
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By Erin Richards of the Journal Sentinel

Sept. 27, 2011 0

An investment firm charged with selling unsuitably risky investments to five Wisconsin school districts has agreed to settle the charges and pay $30.4 million, which will be distributed to the districts, U.S. securities regulators said today.

The Securities and Exchange Commission charged RBC Capital Markets LLC  with misconduct in the sale of unsuitable investments to the Waukesha, Whitefish Bay, West Allis-West Milwaukee, Kenosha and Kimberly school districts, and for inadequate disclosures about the risks of those investments, according to a news release.

RBC marketed and sold to trusts created by the districts $200 million worth of risky investments, for which the districts contributed $37.3 million of their own funds and borrowed the rest. The districts made the investments to help fund post-retirement benefits, which they had promised to employees.

"It's a great day for these five districts," said Stephen Kravit, an attorney representing the districts. He added that they had been vindicated in fraud, and that a significant portion of their losses would be paid immediately by RBC.

Districts can expect to receive their share of the money, distributed by the SEC through a formula, within 10 days.

The SEC also has also charged a St. Louis-based financial firm, Stifel, Nicolaus & Co., with fraud in connection with the same sale. That case is still pending.

The districts also have civil lawsuits pending against both financial firms, Kravit said.

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About Erin Richards

Erin Richards covers K-12 education in urban and suburban Milwaukee, as well as state politics related to education issues.

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