Treasury Says Wheat First Admitted Violations

Wheat First Securities Inc. admitted violating Treasury rules by purchasing freshly auctioned government securities for wealthy clients at a discount and arranging to resell them prematurely, the Treasury Department revealed. The unit of Charlotte, N.C.-based First Union Corp. bought the securities at the same price that major Wall Street dealers paid for them at Treasury auctions under a program that sets aside a portion of the offerings for individuals. The Treasury prohibits investors from reselling or arranging to resell securities bought under that program until the results of the auctions are announced. Between January 1995 and May 1998, Wheat First violated those rules. Generally, newly auctioned Treasury securities resell at a premium in the secondary market, just after the auction. A senior Treasury official said the Wheat First violations of bidding rules came to light during a routine review of bidding records. Wheat First President Ross M. Annable said in a letter to Treasury Undersecretary John D. Hawke Jr. that the violations were innocent errors and that it has taken steps to ensure that they do not reoccur. In a reply letter, Hawke said the firm would not be penalized beyond public disclosure of its violation “in light of the remedial steps that Wheat First has taken and the commitment to continue to take all steps possible to ensure that such violations do not occur again.” A Treasury official, who spoke on condition of anonymity, said the department did not know if Wheat First’s customers profited from violating the auction rules.