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

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

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Re: In the Matter of Auction Rate Securities, Wachovia Securities, LLC (C-747l) Regarding Wells Fargo & Company and Prudential Financial, Inc; Waiver Requests of Ineligible Issuer Status under Rule 405 of the Securities Act Dear Mr. Huntington:
This is in response to your letter dated February 18,2009, written on behalf of Wachovia Securities LLC (Company) and its indirect parents Wells Fargo & Company (Wells Fargo) and Prudential Financial, Inc. (Prudential) constituting an application for relief from Wells Fargo and Prudential being considered "ineligible issuers" under Rule 405(1 )(vi) of the Securities Act of 1933 (Securities Act) arising from the settlement of a civil injunctive proceeding with the Commission. On February 5, 2009, the Commission filed a civil injunctive complaint (Complaint) in the United States District Court for the Northern District of Illinois, against the Company. The Complaint alleges that the Company violated Section 15(c) of the Securities Exchange Act of 1934 (Exchange Act). The Company filed a consent in which it agreed, without admitting or denying the allegations of the Commission's Complaint, to the entry of a Final Judgment against it. The Final Judgment as entered on February 17,2009, permanently enjoins the Company from violating Section 15(c) of the Exchange Act. . Based on the facts and representations in your letter, and assuming the Company, Wells Fargo and Prudential comply with the Final Judgment, the Commission, pursuant to delegated authority has determined that Wells Fargo and Prudential have made a showing of good cause under Rule 405(2) and that Wells Fargo and Prudential will not be considered ineligible issuers by reason of the entry of the Final Judgment. Accordingly, the relief described above from Wells Fargo and Prudential being ineligible issuers under Rule 405 of the Securities Act is hereby granted and the effectiveness of such relief is as of the date of the entry of the Final Judgment. Any different facts from those represented or non-compliance with the Final Judgment might require us to reach a different conclusion. Sincerely, 7Y/~1{KJUft Mary Kosterlitz Chief, Office of Enforcement Liaison Division of Corporation Finance

PAUL. WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 AVENUE OF THE AMERICAS
NEW YORK. NEW YORK 10019-6064
TEL.EPHONE (212) 373-3000
FACSIMILE (212) 757-3990
LLOYD K. GARRISON (, 946-199 I )
RANDOLPH E. PAUL ('946-19561
SIMON H. RIFKJND ('950-1995)
LOUIS S. WEISS (1927-1950)
JOHN F.-WHARTON (1927-1977,
WRITER'S DIRECT DIAL NUMBER
(212) 373-3124
WRiTER'S DIRECT FACSINULE
(212) 492-0124
WAITER'S DJRECT E-MAIL ADDRESS dhuntington@paulweiss.com 161S L STREET, NW WA,.SH,NGTON. DC 20036-5694 TELEPHONE 1202, 223-7300 FACSIMILE (202) 223-7420 i FUKOKU SEIME' BUILDING 2-2 UCHISAIWAICHQ 2-CHOME CHIYOOA-KU. -TOKYO 100-001 t. JAPAN TELEPHONE /81-3J 3597-8101 FACSIMILE IB 1,3.3597-8120 UNIT 3601. FORTUNE PLAZA o,FleE TOWEn A NO.7 DONG SA,.,.HUAN ZHONGLU CHAO YANG DiSTRiCT BEIJING 100020 PEOPLE'S REPUBLIC OF CHINA TELEPHONE (B6-l0) 5828-6300 I='ACSIMILE .86·1016530·9070/9080 12TH FLOOR. HONG KONG. CLUB BUILDING 3A CHATER ROAD, CENTRAL HONG KONG TELEPHONE 185Z1 2536-9933 FACSIMILE (8521 2536-9622 ALDER CASTLE 10 NOBLE STREET LONDON EC2V 7JU. U.K. TELEPHONE (4420,7367 1600 FACSIMILE 144 20,7367 1650 MA.TTHEW W. ABBOTT MARK H. ALCOTT ALLAN J. ARFFA ROBERT A. ATKINS .JOHN F. BAUGHMAN LYNN S. BAYARD DANIEL J. BELLER MITCHELL L. BERG MARK S. BERGMAN BRUCE BIRENBOIM H. CHRISTOPHER BOEHNING ANGELO BONVINQ RICHARD S. BORISOFF HENK BRANDS JAMES L. BRQCHIN RICHARD J. BRONSTEIN SUSANNA M. BUERGEL PATRtCK S. CAMPBELL· JEANETTE K. CHAN YVONNE Y. F. CHAN LEWIS R. CLAYTON JAY COHEN KELLEY A. CORNISH CHARLES E. DAVIDOW DOUGLAS R. CAVIS THOMAS V DE LA eASTlDE 111 ARIEL J. DECKELBAUM JAMES M. DuelN LESLIE GORDON FAGEN MARC FALCONE pE L. FELCHER RO RTO FINZI PE FISCH RO . FLEOER ~.e-OREW }.Urot~~AUM. HARRIS S. FREIDUS KENNETH A. GALLO MICHAEL E. GERTZMAN PAUL D. GINSBERG ERIC 5: GOLDSTEIN ERIC GOOOJ50N CHARLES H. GOOGE. JR. ANDREW G. GORDON BRUCE A.. GuTE.NPLAN GAINES GWATHMEY. Itl ALAN S. HALPERtN CLAUDIA HAMMERMAN GERARD E. HARPER BRIAN S. HERMANN ROBERT ~I HIRSH MICHELE HIRSHMAN JOYCE S. HUANG JEH CHARLES JOHNSON MEREDITH J. KANE ROeERTA, A. KAPLAN BRAD S. KARP JOHN C. KENNEDY ALAN W. KORNBERG DANIEL J. KRAMER 'Nor AUMll ft." "0 THE NEW VORt. eA~ DAVID K. LAKHOHIR JOHN E. LANGE DANIEL J. LEFFELL XIAOYU GREG UU JEFFREY O. MARELL JULIA TARVER M'ASON 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. PERLMUTTER MARK F. POMERANTZ VALERIE E. RADWANER CAREY R. RAMOS CARL L. REISNER WALTER G. RICCIAROI WALTER AIEMf..N RICHARD i. ROSE~':
ANDREW N. ROSE.Ne:::..RG
STEVEN B. ROSENFELD PETERJ ROTHENBERG
RAPHAEl.. M. RUSSO JEFFREY D. SAFERSTEl~
JEFFREY B. SAMUEl.S
DALE M. SARRO TERRY E. SCHIMEK KENNETH M. SCHNEIDER ROBERT 8. SCHUMER JAMES H. SCHWAB STEPHEN J. SHIMSHAK DAVie R. SJCULAR MOSES SILVERMAN STEVEN SIMKIN JOSEPH J. SIMONS MARILYN SOBEL TARUN M. STEWART ERIC ALAN STONE AIDAN SYNNOTT ROBYN F. TARNOFSKY JUDITH R. THOYER DANIEL J. TOAL MARK A UNDERBERG LIZA M. vELAZQUEZ MARIA T. VULLO LAWRENCE G. WEE THEODORE V. WELLS. JR. STEVEN J: WILLIAMS LAWRENCE l. WITOORCHIC JORDAN E. YARETT KAYE N. YOSHINO ALFRED D. YOUNGWOOD TONG YU TRACEY A. ZACCONE T. POBERT ZQCHOWSKI. JR. February 18, 2009 FIRST CLASS MAIL AND EMAIL Mary J. Kosterlitz, Esq. .Chief, Office ofEnforcement Liaison Division of Corporation Finance, Stop 3628 Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 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 Rule 405 Dear Ms. Kosterlitz:
. We submit this letter on behalf of Wachovia Securities, LLC (the "Settling Firm"), Wells Fargo & Company ("Wells Fargo") and Prudential Financial, Inc. ("Prudential"), in connection with a contemplated settlement between the Settling Finn and the Securities and Exchange Commission (the "Commission") in the above referenced civil proceeding relating to the Settling Firm's sale of auction rate securities to its customers. The Settling Firm is an indirect subsidiary of Wells Fargo. Through its direct and indirect subsidiaries, Wells Fargo offers banking, brokerage, advisory and other financial OoeU· USI :5295058,·7

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PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Mary J. Kosterlitz, Esq. services to institutional and individual customers worldwide. The Settling Firm may also be considered an indirect subsidiary of Prudential. I We hereby request, pursuant to Rule 405 ("Rule 405") promulgated under the Securities Act of 1933, as amended (the "Securities Act"), that the Division of Corporation Finance (the "Division"), acting pursuant to delegated authority, grant a waiver to Wells Fargo and Prudential with respect to any "ineligible issuer" status (as defined.in Rule 405) that may arise as a result of the entry of.the Final Judgment (as defined below) or any related state or territory court injunction. 2 We request that this waiver be made effective upon entry of the 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. As a 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 of Illinois relating to a complaint (the "Complaint"), which was filed by the Commission on February 5,2009. Under the terms ofthe Consent, the Settling Firm neither admits nor denies 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 l5(c) of the 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 of widespread 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 of realizing the par value of their auction rate securities. The Final Judgment enjoins the Settling Firm from future violations of Section 15(c) of the Exchange Act and requires the Settling Firm to take certain other remedial measures. The Settling Firm is a subsidiary ofWachovia Securities Financial Holdings, LLC ("WSFH"), a joint venture between Wells Fargo (as a result of its merger with Wachovia Corporation) and Prudential. Prudential's precise indirect ownership interest in WSFH, taking into account, among other things, Wachovia Corporation's 2007 acquisition of A.G. Edwards, Inc., is in the process of being determined. We request that any waiver granted apply to Prudential to the extent that. Prudential is deemed a parent company of Wachovia Securities. The Settling Firm expects also to enter into settlement agreements regarding the activity referred to in the Complaint (as defined below) 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 an ineligibility under Rule 405. this request also covers any such resulting ineligibility.

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PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Mary J. Kosterlitz, Esq.
DISCUSSION
In 2005, the Commission adopted rules that significantly modified the registration, communications and offering processes under the Securities Act. See Securities Act Release No. 33-8591 (the "Offering Refonn Release"). The changes eliminate certain restrictions on offerings and provide more timely investment infonnation to investors without mandating delays in the offering process that were considered by the Commission to be inconsistent with the needs of issuers for timely access to capital. Among the changes were the creation of a new category of issuer, defined in Rule 405as a "well-known seasoned issuer," and a new category ofofferiQg communication, defined in Rule 405 as a "free writing prospectus." The changes to Rule 405 also added a definition of another category of issuer, defined as an "ineligible issuer," which is excluded from the category ofwell-known seasoned issuer and which is not eligible to make communications by way of a free writing prospectus, except in limited circumstances. See Rules 164(e) and 433(b)(2) under the Securities Act. An issuer is an ineligible issuer for the purposes of Rule 405 if, among other things, "(w] ithin the past three years ... the issuer .or any entity that at the time was a subsidiary ofthe issuer was made the subject of any judicial or administrative decree or order arising out of a governmental action that ... (p]rohibits certain conduct or activities regarding, including future violations of, the anti-fraud provisions of the federal securities laws." Ineligible issuer status may be waived if "the Commission detennines, upon a showing of good cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer." The Commission has delegated to the Division of Corporation Finance the authority to grant or deny applications requesting that an issuer not be considered an ineligible issuer as defined in Rule 405. Accordingly, we hereby request that a waiver be granted to Wells Fargo and Prudential with respect to any "ineligible issuer" status that may arise under Rule 405 as a result ofthe entry of the Final Judgment or any related state or territory court injunction, and that the waiver be effective upon entry of the Final Judgment. For the following reasons, we do not believe that the protection of investors or the public interest would be served by denying Wells Fargo and Prudential the benefits afforded by the Securities Act to issuers that are not classified as ineligible issuers:

1. The Settling Firm's conduct addressed in the Final Judgment does not
   relate to activities undertaken by Wells Fargo or Prudential with respect to their own disclosure as issuers of securities or in any of their own disclosure in their filings with the Commission.
2. The Settling Firm 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 of this matter and agreed to pursue a comprehensive settlement at the request of the Enforcement Di v.ision.

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PAUL, WEISS, RIFKIND. WHA;RTON & GARRISON LLP
Mary J. Kosterlitz, Esq.
3. Being considered ineligible issuers will preclude Wells Fargo and
Prudential from taking advantage of many ofthe benefits described in the Offering Reform Release and will leave these companies at a significant disadvantage to their peer firms and hinder necessary and periodic access to the capital markets through significantly increased time, labor and cost of such access.
4. The disqualification of Wells Fargo and Prudential from the benefits
described in the Offering Refonn Release is unduly and disproportionately severe, given that the Commission staff has negotiated a settlement with the Settling Firm and reached a satisfactory conclusion to this matter. In light ofthe foregoing, we respectfully submit that it is not necessary under the circumstances that Wachovia and Prudential be considered ineligible issuers as a result of the entry of the Final Judgment or any related state or territory court injunction, and that they has shown good cause that reliefshould be granted. Please do not hesitate to contact me at (212) 373-3124 regarding this request. Sincerely, tttl.k!~d Ii.. / ,-~ i. t/ David S. Huntington Cc: Doug Kelly, Wachovia Securities, LLC

David Hebner, Wachovia Securities, LLC

Robert L. Lee, Wells Fargo & Company

Kathryn Quirk, Prudential Financial, Inc.

Kenneth J. Bennan, Debevoise & Plimpton LLP