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Fri, Jan 28, 2005 - Page 12 News List

Lehman Brothers Holdings the subject of SEC probe

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Lehman Brothers Holdings Inc said it is cooperating with a US Securities and Exchange Commission probe of brokers in the US$204 billion auction-rate bond market.

Lehman "has received a letter from the commission requesting that it voluntarily conduct an investigation regarding its practices and procedures in connection with those markets," the firm said today in an SEC filing on behalf of the Energy Income and Growth Fund.

"Lehman Brothers is cooperating with the commission in providing the requested information."

The SEC is investigating whether brokers improperly tipped customers to other investors' bids in auctions that set yields for the securities, people familiar with the matter have said.

Investors aren't supposed to be able to see competing bids.

Lehman spokeswoman Hannah Burns declined to comment. Lehman included the disclosure in the offering documents for the sale of US$34 million in notes by the energy fund, a sale that the firm is underwriting. The SEC asked about 25 firms that participate in the auction-rate market to conduct similar investigations. The agency's enforcement staff asked brokers to provide reports "detailing any potentially deceptive, dishonest or unfair practices," according to a memo sent to members in May by the Bond Market Association, the Securities Industry Association and the American Bar Association.

UBS AG, Citigroup Inc, Merrill Lynch & Co, Wachovia Corp, Bank of America Corp and AG Edwards Inc have previously disclosed that they are subjects of the inquiry. The SEC hasn't publicly accused any firm of wrongdoing in connection with the probe.

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