FOR IMMEDIATE RELEASE
Friday, January 13, 2006
Contact: Stacie Temple, (573) 526-5076
Contact: Mike Seitz, (573) 526-0949
Carnahan Enters Into Consent Order With Waddell & Reed
Jefferson City, Missouri -- Secretary of State Robin Carnahan's Acting Commissioner of Securities, Matt Kitzi, issued a consent order earlier this week against Waddell & Reed, Inc., and its employee, Richard Burbach.
The order requires Waddell & Reed to pay $90,000 in restitution, a civil penalty of $75,000 to benefit public schools and $6,800 for the Secretary of State’s investigation costs. In addition, Burbach is required to pay $6,500 in restitution.
The order alleges that Burbach gave inappropriate investment advice regarding variable annuities and B share mutual funds to an elderly investor while under the supervision of Waddell & Reed, Inc.
Burbach's registration was censured and he agreed to a 10-day suspension.
"One of my most important duties as Secretary of State is protecting Missouri investors. It is a priority of the Securities Division of my office to protect investors against investments that are not in their best interest," said Carnahan.
The order states that Waddell & Reed has instituted a number of safeguards in recent years to improve its supervisory procedures and provide training for its employees. Waddell & Reed also agreed to provide customer complaint reports to the Secretary of State during the year of 2006 while continuing to review its internal regulatory procedures.
Carnahan cautioned investors to ask a lot of questions, especially when considering variable annuities. "Because variable annuities include long-term commitments of money and are subject to high fees, surrender penalties and varying levels of risk, they are clearly inappropriate for many investors, especially seniors, " she added.
In 2005, Missouri was the first state to take action against Waddell & Reed for recommending variable annuity exchanges to its customers without determining the suitability of the transactions. Carnahan secured more than $500,000 for Missouri investors, public schools and the investor education fund as part of a multi-state settlement reached with Waddell & Reed shortly thereafter.
"It is important for Missouri investors to be able to trust their investment broker or adviser to act in the investor's best interest, "said Kitzi.
For more information regarding investments and fraud protection, visit the Secretary of State's web site at www.sos.mo.gov/securities/ or call the toll free investor hotline at 1-800-721-7996.
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