SEC Investigating Florida’s Citizens Over Bid Placements

December 15, 2008

The Securities and Exchange Commission is investigating the state-backed Citizens Property Insurance Corp. on bid placements earlier this year on auction rate securities.

The SEC issued a subpoena June 24 seeking documents on Citizens’ buyback of its own debt instruments earlier this year, but it became public for the first time Friday at a Citizens board meeting.

Citizens is the state’s largest property insurer with some 1.2 million policyholders.

The subpoena asks for all internal and external e-mails concerning bids, all documents on Citizens’ disclosure of its intention to bid for its own securities and documents identifying the authorized auction broker dealers that placed the bids.

Citizens’ spokeswoman Christine Turner said Friday that the company’s senior management team, board chairman along with its internal and external counsel “believed the best course of action was to keep the chairman apprised and allow the SEC to do their research without fully apprising the world of it.”

The state’s top insurance regulator, Kevin McCarty, learned only earlier this month of the subpoena and most Citizens’ board members were in the dark until Friday’s meeting.

“The Office of Insurance Regulation is aware of the situation and will be monitoring to determine if there are any regulatory issues involved,” said OIR spokesman Ed Domansky. “We were not made aware of the matter until the first part of the month when we were notified by Citizens and the Office of Financial Regulation.”

An auction rate security is sold at an interest rate that will clear the market at the lowest yield possible. It is sold through a Dutch auction to ensure all bidders receive the same yield on the debt issue.

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