TD Ameritrade nears settlement on ARS

TD Ameritrade Holding Corp. is close to reaching a settlement with the Securities and Exchange Commission over the sale of auction rate securities that were marketed as liquid investments to registered investment advisers and investors before the that market froze last February, Fred Tomczyk, chairman and chief executive of the broker and RIA custodian, said in an interview at the firm's annual RIA conference this week. The Omaha, Neb-based firm is not as exposed to auction rate securities as some other midsize or online brokers, he said, and does not expect any settlement to be material to earnings. Mr. Tomczyk expects private-sector litigation over such securities against TD Ameritrade and many other firms to continue, but he noted that his firm is much less exposed than many competitors. As of Feb. 2, TD Ameritrade clients held auction rate securities with an aggregate par value of approximately $694 million, including $192 million in custody for clients of independent RIAs, the firm said in a regulatory filing Thursday. Large investment banks that conducted the auctions have already made billion-dollar settlements with state regulators and the SEC. While many investors are clamoring to get the firms to unlock their frozen assets, some regulators have been worried about the effects that settlements could have on smaller brokers. Wachovia Securities LLC on Thursday reached a settlement with the SEC in which it agreed to pay investors more than $7 billion to buy back failed auction rate securities. The St. Louis-based firm previously repurchased more than $6.2 billion of eligible securities from investors under settlements. Separately, Mr. Tomczyk said TD Ameritrade is not actively pursuing any acquisitions of asset management firms despite a cash cushion of over $1 billion and a desire to lessen its dependence on active online traders by becoming more of an asset-gathering firm. The company is in the process of buying thinkorswim Inc., a Chicago-based options-trading firm. TD Ameritrade, which this year plans to cut 6% of its expenses, or about $60 million, to offset declining revenue from trading and net interest margin, was recently upgraded to investment-grade status by leading credit-rating firms because of its sound capital position.