SEC Division of Corporation Finance no-action letter: Wachovia Capital Markets, LLC

UNITED STATES
SECURITIES A-ND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
CORPORATION FINANCE
May 3 1,2006
Henry F. Minnerop, Esq.

Sidley Austin LLP

787 Seventh Avenue

New York, NY 1 00 19
Re: Wachovia Capital Markets, LLC, Administrative Proceeding File No. 3-12310- Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Mimerop:
This is in response to your letter dated today, written on behalf of Wachovia Capital Markets, LLC ("Wachovia") and constituting an application for relief under Rule 262 of Regulation A and Rule 505@)(2)(iii)(C) of Regulation D under the Securities Act of 1933 ("Securities Act"). You requested relief from disqualifications from exemptions available under Regulation A and Rule 505 of Regulation D that arose by virtue of the entry of an order dated today against Wachovia and others as respondents by the Securities and Exchange Commission in the referenced administrative proceeding (the "Order"). The disqualifications arose because the Order was issued under Section 15(b) of the Securities Exchange Act of 1934 and contained paragraphs numbered IV.D and IV.E, which ordered Wachovia, among other things, to provide written descriptions of its material auction practices and procedures for auction rate securities. The order also was issued under Section 8A of the Securities Act and also censured Wachovia, ordered Wachovia to cease and desist from committing or causing any violations and any future violations of Section 17(a)(2) of the Securities Act, and ordered Wachovia to pay a civil money penalty in the amount of $125,000. For purposes of this letter, we have assumed as facts the representations set forth in your letter and the findings supporting entry of the Order against Wachovia. We have also assumed that Wachovia has complied and will continue to comply with the Order. On the basis of your letter, I have determined that Wachovia has made a showing of good cause under Rule 262 and Rule 505@)(2)(iii)(C) that it is not necessary under the circumstances to deny the exemptions available under Regulation A and Rule 505 of Regulation D by reason of entry of the Order against Wachovia. Accordingly, pursuant to delegated authority, Wachovia is granted relief from any disqualifications from exemptions otherwise available under Regulation A and Rule 505 of Regulation D that arose as a result of entry of the Order against it. Very truly yours, rdnsf+ rald J. Laporte /Chief, Office of Small Business Policy

SIDLEY AUSTIN LLP BElJlNG GENEVA SAN FRANCISCO 787 SEVENTH AVENUE BRUSSELS HONG KONG SHANGHAI NEW YORK, NY 10019 CHICAGO LONDON SINGAPORE 212839 5300 DALLAS LOS ANGELES TOKYO 212 839 5599 FAX FRANKFURT NEW YORK WASHINGTON, DC hminnerop@sidley.com (212) 839-5555 I FOUNDED 1866 By Federal Express Gerald J. Laporte, Esq. Chief, Office of Small Business Policy Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549-3628 Re: In the Matter of Certain Auction Practices,

File No. HO-09954 (Wachovia Capital Markets, LLC)

Dear Mr. Laporte:
We submit this letter on behalf of our client, Wachovia Capital Markets, LLC ("Wachovia"), and its affiliates, as a result of an administrative settlement between the Securities and Exchange Commission ("Commission") and Wachovia in the above referenced matter relating to certain auction practices at Wachovia and multiple large broker-dealer firms. Wachovia below requests, pursuant to Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D of the Commission promulgated under the Securities Act of 1933 (the "Securities Act"), a waiver of any disqualification from exemptions under Regulation A and Rule 505 of Regulation D that may be applicable to Wachovia and any of its affiliates as a result of the entry of the Order (as defined below) and any related disqualifying order, judgment or decree of a state or territorial court addressing the same conduct as is addressed in the Order. Wachovia also requests that these waivers be granted effective upon entry of the Order. It is our understanding that the Division of Enforcement does not object to the grant of the requested waivers by the Commission, or an individual Commission employee to whom appropriate authority has been delegated in accordance with 17 C.F.R. 5 200.30-1. BACKGROUND As a result of settlement discussions with the Staff in the above referenced matter, Wachovia submitted an Offer of Settlement. Without admitting or denying the findings therein, except as to jurisdiction, and solely for the purpose of proceedings brought by or on behalf of the Commission, or in which the Commission is a party, Wachovia consented to the entry of an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Sidiey Austln UP is a limited liability partnership practicing in aff~liation with other Sidley Austin partnewhips

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GERALD J. LAPORTE, ESQ.
Imposing Remedial Sanctions and a Cease-and Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Section 15(b) of the Securities Exchange Act of 1934 (the "Order"). The Order, among other things, orders Wachovia to cease and desist from committing or causing any violation and any fkture violations of Section 17(a)(2) of the Securities Act, and to pay a civil money penalty of $125,000. DISCUSSION Wachovia understands that the entry of the Order could disqualify it and its affiliated entities from participating in certain offerings otherwise exempt under Regulation A and Rule 505 of Regulation D promulgated under the Securities Act, insofar as the Order may be deemed to cause Wachovia to be subject to an order of the Commission entered pursuant to section 15(b), 15B(a), or 15B(c) of the Securities Exchange Act. The Commission, or an individual Commission employee to whom appropriate authority has been delegated in accordance with 17 C.F.R. 5 200.30-1, has the authority to waive the Regulation A and Rule 505 of Regulation D exemption disqualifications upon a showing of good cause that such disqualifications are not necessary under the circumstances. See 17 C.F.R. 55 230.262 and 230.505(b)(2)(iii)(C). Wachovia requests, on the following grounds, that the Commission, or an individual Commission employee to whom appropriate authority has been delegated in accordance with 17 C.F.R. 5 200.30-1, waive any disqualifying effects that the Order may have under Regulation A and Rule 505 of Regulation D with respect to Wachovia and its affiliates:

1. Wachovia's conduct addressed in the Order does not relate to offerings under
   Regulation A or Regulation D.
2. Wachovia has a strong record of compliance with the securities laws. In addition,
   Wachovia voluntarily cooperated with the Division of Enforcement's above-captioned investigation and agreed to pursue a global settlement of this matter at the request of the Division of Enforcement. Furthermore, Wachovia has agreed to provide written descriptions of its material auction practices and procedures to relevant customers, and to have its Chief Executive Officer or General Counsel certify in writing to the Commission's staff that the firm has provided such written descriptions to customers and has implemented policies and procedures that are reasonably designed to prevent and detect failures to conduct the auction process in accordance with auction procedures in its disclosures.
3. The disqualification of Wachovia and its affiliates from the exemptions under
   Regulation A and Rule 505 of Regulation D would, we believe, have an adverse impact on third parties that have or may retain Wachovia and its affiliates in connection with transactions that rely upon these exemptions.
4. The disqualification of Wachovia and its affiliates from the exemptions available
   under Regulation A and Rule 505 of Regulation D would be unduly and disproportionately severe, given that: (i) the Order relates to activity that has already been addressed by the Order; and (ii) the Commission Staff negotiated a settlement with Wachovia and reached a satisfactory NYI 5851014v.I

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GERALD J. LAPORTE, ESQ. bqay .?/ .2006

PAGE 3 NEW YORK
conclusion to this matter that required Wachovia to pay $125,000 in settlement of the matter addressed in the Order and to comply with the undertakings set forth in the Order. In light of the foregoing, we believe that disqualification is not necessary, in the public interest, or for the protection of investors, and that Wachovia has shown good cause that relief should be granted. Accordingly, we respectfully request the Commission, or an individual Commission employee to whom appropriate authority has been delegated in accordance with 17 C.F.R. 5 200.30-1, pursuant to Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D, waive, effective upon entry of the Order or any related disqualifying order, judgment or decree of a U.S. state or territorial court based on the same facts and addressing the same conduct as is addressed in the Order, the disqualification provisions in Regulation A and Rule 505 of Regulation D to the extent they may be applicable to Wachovia and any of its affiliates as a result of the entry of the order.' If you have any questions regarding this request, please contact the undersigned at 212- Sincerely, Henry 6jllC% F Minnerop cc: Andrew Sporkin, Esq., Division of Enforcement ' We note in support of this request that the Commission has, in other instances, granted relief under Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D for similar reasons. See, e.g., Credit Suisse First Boston Corporation, S.E.C. No-Action Letter (pub. avail. Jan. 29, 2002); Dain Rauscher, Incorporated, S.E.C. No-Action Letter (pub. avail. Sept. 27, 2001); Legn Mason Wood Walker, Incorporated, S.E.C. No-Action Letter (pub. avail. June 11, 2001); In the Matter of Certain Market-Making Activities, S.E.C. No-Action Letter (pub. avail. Jan. 11, 1999); and Stephens Incorporated, S.E.C. No-Action Letter (pub. avail. Nov. 23, 1998). NYI 5851014v.1