Rule No1 in crisis management PR: get ALL your bad news out at the FIRST available opportunity.
So we must assume the good investor relations people at moneybroker ICAP were terribly frustrated on Friday, having to release the following just as the London market was closing:
On 22 October, 2009, the New York Regional Office Staff of the U.S. Securities and Exchange Commission (SEC) provided ICAP Securities USA LLC (ICAP), a subsidiary of ICAP plc, with a “Wells” notice stating that the Staff intends to recommend that the Commission bring enforcement actions for possible violations of the federal securities laws. The notice relates to an existing SEC investigation into the market in certain fixed income securities which has been ongoing since 2005. The Wells notice is not a formal allegation nor a finding of wrongdoing. The company has discussed these matters with the SEC, has substantial disagreements with the SEC regarding how they should properly be viewed, and will vigorously put forth its position if and when any such charges are brought. Further statements will be made as appropriate.
So…
Which fixed income securities?
What is ICAP alleged to have done?
How much might be involved?
If the investigation has been ongoing since 2005, why have we only learn about it now?
What’s the firm’s defence?
Who are the alleged victims?
Do they know?
Have they indicated whether they might sue?
How will you respond – with a Wells Submission?
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Actually, we should qualify Q no4 above: ICAP did disclose the fact that the SEC was snooping around the world of interdealer brokers and also the MBS market in its annual reports. From the 2009 edition:
In February 2006, in the US, the SEC issued a formal order of investigation to ICAP Securities USA LLC, a wholly-owned subsidiary of the Group, and other interdealer brokers in government and other fixed income securities. In addition, the SEC has issued several requests for information relating to ICAP Securities USA LLC’s voice mortgage-backed securities desk. The mortgage aspect of the investigation has been in progress since April 2008. ICAP Securities USA LLC continues to co-operate with the enquiry.
Also, we can certainly answer the final question above.
Wells notices were introduced in the early 70s – being named after John Wells, who led a committee looking at SEC enforcement practices at the time. Firms or individuals facing SEC enforcement action can respond to a notice with their own Wells submission.
Trouble is, such submissions can be made public by the SEC and they are not privileged, so other parties can use such disclosures as the basis for their own claims. Hence, they are rarely produced – even if ICAP wanted us to know…
Related links:
ICAP receives SEC Wells notice – Dow Jones
The Wells Notice in SEC and NASD Investigations – SEC Law.com