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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE February 26,2009
David S. Huntington, Esq.

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue ofthe Americas

New York, NY 10019-6064

Re: Wachovia Securities, LLC-Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Huntington:
This is in response to your letter dated February 26, 2009, written on behalf ofWachovia Securities, LLC ("Wachovia") and constituting an application for relief under Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D under the Securities Act of 1933. You requested relief from disqualifications from exemptions otherwise available under Regulation A and Rule 505 of Regulation D that arose as a result ofthe entry of a Final Judgment dated February 17,2009 by the United States District Court for the Northern District oflllinois in SEC v. Wachovia Securities, LLC, Civil Case No. 09 CV 743 (the "Judgment"). The Judgment permanently restrains and enjoins Wachovia from violating Section 15(c)(I) of the Securities Exchange Act of 1934 and orders Wachovia to comply with the undertakings and agreements set forth in the Consent incorporated into the Judgment. You also requested relief from disqualifications under Regulation A and Rule 505 of Regulation D that arise as a result of the entry of an injunction of a U.S. state or territorial court arising from the same facts and circumstances addressed in the complaint that resulted in the entry of the Judgment (the "Complaint"). For purposes of this letter, we have assumed as facts the representations set forth in your letter and the findings supporting entry of the Judgment. We also have assumed that Wachovia will comply with the Judgment. On the basis ofyour letter, I have determined that Wachovia has made showings of good cause under Rule 262 and Rule 505(b)(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 ofthe entry ofthe Judgment or any state or territorial court injunction addressing the same conduct and based on the same facts as the conduct and facts addressed in the Complaint. Accordingly, pursuant to delegated authority, relief from the disqualifying provisions ofRegulation A and Rule 505 of Regulation D that deny such exemptions for such reasons is hereby granted. Very truly yours, {;~8.Y~ Chief, Office of Small Business Policy

PAUL. WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
TELEPHONE (212) 373-3000
FACSIMILE (2' 2) 757-3990
LLOYD K. GARRISON (1946-1991)
RANDOLPH E. PAUL. 0946-1956)
SIMON H. RIFKIND (1950-'995)
LOUIS S. WEISS ('927-1950)
JOHN F. WHARTON (1927-1977)
WRiTER'S DIRECT DIAL NUMBER
2123733124
WR1TER'S DIRECT FACSIMILE
2124920124
WRITER'S DIRECT E·MAIL. ADDRESS dhuntington@paulweiss.com 2001 K STREET, NW WASt"'IINGTON. DC 200045-1047 TELEPHONE (202) 223·7300 FACSIMILE (202) 223·742.0 FUKOKU SEIMEI SUIL.OING 2-2 UCHISAIWAICHO 2·CHOME CHIYODA.-KU, TOKYO 100-0011, JAPAN TELEPHONE (81·3) 3597-8,01 FACSIMILE (SI-3) 3597-8120 UNIT 3601. FORTUNE PLAZA OFFICE TOWER A NO.7 DONG SANHUAN ZHONGLU CHAO YANG DJSTRICT BEIJING ,0002.0 PEOPLE'S REPUBLIC OF CHINA. TELEPHONE (86-10) 5828-6300 FACSIMILE (B6-1 0) 6530-9070(9080 12TH FLOOR. HONG KONG CLUB BUILDING 3A CHATER ROAD, CENTRAL HONG KONG TEL.EPHONE (852) 2535-9933 FACSIMILE (852) 2536-9622 ALDER CA.5!TLE 10 NOBLE STREET L.ONDON EC2V 7JU. U.K. TELEPHONE (44 20) 7367 1600 FACSIMILE (4420) 73&7 1650 February 26,2009 MATTHEW W. ABBOTT MARK M. ALCOTT ALLAN J. ARFFA ROBERT A. ATKINS JOHN F. BAUGHMAN LYNN B. BAYARD DANIELJ LER MITCHEL BERG MARK S. N BRUCE B M H. CHRIS BOEHNING ANGELO BONVINO HENK BRANDS JAMES L. BROCHIN RICHARD J. BRONSTEIN DAVID W. BROWN SUSANNA M. BUERGEL PATRICK S. CAMPBELL* JEANETTE K. CHAN YVONNE Y. F. CHAN LEWIS R. CLAYTON JAY COHEN KELLEY A. CORNISH CHARLES E. DAVIDOW DOUGLAS R. DAVIS THOMAS V. DE LA BASTIDE III ARIEL J. DECKELBAUM JAMES M. DUBIN ANDREW J. EHRLICH LESLIE GORDON FAGEN MARC FALCONE p FELCHER R FINZI PE FISCH ROBE . FLEDER MARTIN LUMENBAUM ANDREW J. FOLEY HARRIS B. FRElOUS MANUEL. S. FREY KENNETH A. GALLO MICHAEL E. G£RTZMAN PAUL D. GINSBERG ERIC S. GOLDSTEIN ERIC GOODlSON CHARLES H. GOOGE, JR. ANDREW G. GORDON BRUCE A. GUTENPLAN GAINES GWATHMEY, III ALAN S. HALPERfN CL.AUDIA HAMMERMAN GERARD E. HARPER BRIAN S. HERMANN ROBERT M. H"~SH MICHELE HIRSHMAN JOYCE S. HUANG MEREDITH J. KANE ROBERTA A. KAPLAN BRAD S. KARP JOHN C. KENNEDY ALAN W. KORNBERG DANIEL J. KRAMER -NOT ADMITTED TO THE NEW YORK BAR DAVID K. LAKHDHIR JOHN E. LANGE DANIEL J. LEFFELL XIAOYU GREG L1U JEFFREY D. MARELL JULIA TARVER MASON MARCO V. MASOTTI EDWIN S. MAYNARD DAVID W. MAYO TOBY S. MYERSON JOHN E. NATHAN CATHERINE NYARADY ALEX YOUNG K. OH JOHN J. O'NEIL KELLEY D. PARKER ROBERT P. PARKER· MARC E. PERL.M UTTER MARK F. POMERANTZ VALERIE E. RADWANER CAREY R. RAMOS CARL L. REISNER WALTER G. RICCIARDI WALTER RIEMAN RICHARD A. ROSEN ANDREW N. ROSENBERG PETER J. ROTHENBERG JACQUELINE P. RUBIN RAPHAEL M. RUSSO JEFFREY D. SAFERSTEIN JEFFREY B. SAMUELS DALE M. SARRO TERRY E. SCHIMEK KENNETH M. SCHNEIDER ROBERT B. SCHUMER JAMES H. SCHWAB STEPHEN J. SHIMSHAK DAVID R. SICULAR MOSES SILVERMAN STEVEN SIMKIN JOSEPH J. SIMONS MARtLYN SOBEL TARUN M. STEWART ERIC ALAN STONE AIDAN SYNNOTT ROBYN F. TARNOFSKY JUDITH R. THOYER DANIEL J. TOAL MARK A. UNOERBERG L1ZA M. VELAZQUEZ MARIA T. VULLO LAWRENCE G. WEE THEODORE V. WEL..LS. JR. BETH A.. WILKINSON STEVEN J. WILLIAMS LAWRENCE I. WITDORCHIC JORDAN E. YARETT KAYE N. YOSHINO TONG YU TRACEY A. ZACCON E T. ROBERT ZOCHOWSKI. JR. FIRST CLASS MAIL AND EMAIL Gerald J. Laporte, Esq. Chief, Office of Small Business Policy Division of Corporation Finance Securities and Exchange Commission 100 F Street, N.E.
Washington, DC 20549-3628 Re: In the Matter of Auction Rate Securities Liquidity, Wachovia Securities, LLC (File No. C-7471); Securities and Exchange Commission v. Wachovia Securities, LLC (N.D.Ill. 2009) - Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Laporte:
We submit thisletter on behalfofour client Wachovia Securities, LLC (the "Settling Finn") in connection with a settlement between the Settling Finn and the Securities and Exchange Commission (the "Commission") in the above referenced civil proceeding relating to the Settling Finn's sale of auction rate securities to its customers. The Settling Finn is an indirect subsidiary of Wells Fargo & Company ("Wells Fargo"). 1 Through its direct and indirect subsidiaries, Wells Fargo offers bariking, The Settling Finn is a subsidiary ofWachovia Securities Financial Holdings, LLC ("WSFH"), a joint venture between Wells Fargo (as a result ofits merger with Wachovia Corporation) and Prudential Financial, Inc. ("Prudential"). Prudential's precise indirect ownership interest in WSFH, taking into account, among other things, Wachovia Corporation's 2007 acquisition of Doc#; USl:5292444v5

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Gerald J. Laporte, Esq. Page 2 brokerage, advisory and other financial services to institutional and individual customers worldwide. The Settling Firm below requests, pursuant to Rule 262 ofRegulation A and Rule 505(b)(2)(iii)(C) ofRegulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), a waiver of any disqualification from exemptions under Regulation A and Rule 505 ofRegulation D that may be applicable to the Settling Finn, any ofits affiliates or any issuer, offering participant or other person as a result ofthe entry ofthe Final Judgment (as defined below) or any related state or territory court injunction arising from the same facts and circumstances addressed in the Complaint (as defined below)? The Settling Firm also requests that these waivers be granted effective as ofthe entry ofthe Final Judgment. BACKGROUND The Settling Firm has engaged in settlement discussions with the staffofthe Division of Enforcement in connection with the civil proceeding referenced above. Asa result ofthese discussions, the Settling Firm has submitted an executed consent dated January 27,2009 (the "Consent"). In the Consent, the Settling Firm has agreed to the entry of a judgment (the "Final Judgment") in the United States District Court for the Northern District ofIllinois relating to a complaint (the "Complaint"), which was filed by the Commission on February 5,2009. Under the tenns ofthe Consent, the Settling Finn will neither admit nor deny the allegations in the Complaint or the findings in the Final Judgment, except as to jurisdiction. The Complaint alleges that the Settling Firm violated Section 15(c) ofthe Securities Exchange Act of 1934, as amended (the "Exchange Act"), by selling auction rate securities to its customers without adequately disclosing the risks involved in purchasing these securities. As a result ofwidespread auction failures beginning in February 2008, many customers who thought they had acquired liquid securities (equivalent to cash) were left with no market for their auction rate securities and no means ofrealizing the par value oftheir auction rate securities. The Final Judgment, which was entered on February 17, 2009, enjoins the Settling Firm from future violations of Section 15(c) ofthe Exchange Act and requires the Settling Firm to take certain other remedial measures. A.G. Edwards, Inc., is in the process ofbeing detennined. We request that any waiver granted apply to Prudential and its affiliates to the extent that Prudential and any ofits affiliates are deemed affiliates ofWachovia Securities. The Settling Finn expects also to enter into settlement agreements regarding the activity referred to in the Complaint with certain states or territories. To the extent that any such settlement agreement may result in an injunction by a court of competent jurisdiction that would cause a disqualification under Regulation A or Regulation D, this request also covers any such resulting disqualification.

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Gerald J. Laporte, Esq. Page 3
DISCUSSION
The Settling Finn understands that the Final Judgment disqualifies it, its affiliated entities and issuers, offering participants and other persons from participating in certain offerings otherwise exempt under Regulation A and Rule 505 of Regulation D promulgated under the Securities Act insofar as the Final Judgment is deemed an order, judgment or decree of a court of competent jurisdiction enjoining the Settling Finn from engaging in or continuing to engage in any conduct or practice in connection with the purchase or sale of a security. The Commission has the authority to waive the exemption disqualification under Regulation A and Rule 505 of Regulation D upon a showing of good cause that such disqualifications are not necessary under the circumstances. See Rule 262 ofRegulation A and Rule 505(b)(2)(iii)(C) ofRegulation D.3 The Settling Finn requests that the Commission waive any disqualifying effects that the Final Judgment and any related state or territory court injunction may have under Regulation A and Rule 505 of Regulation D with respect to the Settling Finn, its affiliates or any issuer, offering participant or other person on the following grounds:

1. The Settling Finn's conduct addressed in the Final Judgment does not
   relate to offerings under Regulation A or Rule 505 of Regulation D.
2. The Settling Finn and its affiliates have a strong record of compliance
   with the securities laws. In addition, the Settling Finn voluntarily cooperated with the Enforcement Division's investigation ofthis matter and agreed to pursue a comprehensive settlement at the request ofthe Enforcement Division.
3. The disqualification ofthe Settling Firm, its affiliates and other persons
   from the exemptions under Regulation A and Rule 505 ofRegulation D would have an adverse impact on third parties that retain or provide services to the Settling Finn or any of its affiliates in connection with transactions that may need to be made in reliance on these exemptions.
4. The disqualification ofthe Settling Finn, its affiliates and other persons
   from the exemptions under Regulation A and Rule 505 of Regulation D would be unduly and disproportionately severe, given that the 3 We note in support ofthis request that the Commission has in other instances granted relief under Rule 262 ofRegulation A and Rule 505(b)(2)(iii)(C) ofRegulation D. Gabelli Funds, LLC, SEC Letter (pub. avail. Apr. 24, 2008); Bank of America Securities LLC, SEC Letter (pub. avail. May 31, 2006); Citigroup Global Markets, Inc., SEC Letter (pub. avail. May 31, 2006); I.P. Morgan Securities, Inc., SEC Letter (pub. avail. May 31, 2006); Wachovia Capital Markets. LLC, SEC Letter (pub. avail. May 31, 2006); American International Group, Inc., SEC Letter (pub. avail. Dec. 7,2004); Goldman, Sachs & Co., SEC Letter (pub. avail. Oct. 30,2003); Credit Suisse First Boston Corporation, SEC Letter (pub. avail. Jan. 29, 2002); Dain Rauscher. Incorporated, SEC Letter (pub. avail. Sept. 27,2001); Legg Mason Wood Walker, IncOIporated, SEC Letter (pub. avail. June 11,2001).

PAUL, WEISS. RIFKIND, WHARTON & GARRISON LLP
Gerald J. Laporte, Esq. Page 4
Commission staffhas negotiated a settlement with the Settling Finn and reached a satisfactory conclusion to this matter. In light ofllie foregoing, the Settling Finn believes that it has shown good cause that reliefshould be granted. Accordingly, we respectfully request the Commission, pursuantto Rule 262 ofRegulation A and Rule 505(b)(2)(iii)(C) ofRegulation D, to waive, effective as ofthe entry ofthe Final Judgment, the disqualification provisions in Regulation A and Rule 505 ofRegulation D to the extent they may be applicable to the Settling Firm, any ofits affiliates or any issuer, offering participant or other person as a result ofthe Final Judgment or any related state or territory court injunction. Please do not hesitate to contact me at (212) 373-3124 regarding this request. Sincerely yours, David S. Huntington Cc: Doug Kelly, Wachovia Securities, LLC

David Hebner, Wachovia Securities, LLC

Robert L. Lee, Wens Fargo & Company

Kathryn Quirk, Prudential Financial, Inc.

Kenneth J. Berman, Debevoise & Plimpton LLP