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The Securities and Exchange Commission said Thursday that Wachovia Corp. agreed to pay a $37 million penalty to settle a case involving proxy disclosure and reporting violations associated with its 2001 merger with First Union Corp. The SEC charged that prior to the merger the banks failed to disclose Wachovia’s purchase of $500 million of First Union shares. This failure was significant because the stock purchases boosted the value of First Union shares. That artificially kept the value of First Union’s offer for Wachovia competitive with a rival offer from SunTrust Banks Inc. “As a result, Old Wachovia’s shareholders were unable to evaluate the effect of Old Wachovia’s purchases of [First Union] shares before voting on the competing bids,” the SEC said in a statement. Wachovia spokeswoman Kristy Phillips said the company is “pleased” to have resolved the situation. She declined further comment, citing the bank’s policy not to discuss regulatory matters. At times, Wachovia purchases of First Union shares accounted for more than half the total daily trading volume in its merger partner’s stock, the SEC said. “A company must provide full and accurate disclosure with respect to its activities in the market during a takeover battle and cannot just rely on boilerplate disclosures,” said Thomas Newkirk of the SEC’s Division of Enforcement. The SEC staff also said its investigation was unnecessarily prolonged because Wachovia failed to produce requested documentation in a complete and timely manner. These actions contributed to the commission’s decision in setting the penalty. “The substantial penalty here reflects not only the seriousness of the disclosure violations but also the company’s failure to meet its legal obligations in the course of an SEC investigation,” said Stephen M. Cutler, director of the enforcement division at the SEC. The SEC said Wachovia agreed to a settlement without admitting or denying the agency’s allegations. Copyright �2004 TDD, LLC. All rights reserved.

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