The man chosen by Missouri Secretary of State Jay Ashcroft to lead the agency that protects consumers from securities fraud is a former executive of a company currently under investigation by the state.
David Minnick served as general counsel and senior vice president of St. Louis-based Stifel Financial Corp. from 2004 until this week, when Jay Ashcroft took over for outgoing Secretary of State Jason Kander.
Now, Minnick is the commissioner of securities, a job that puts him in charge of the division responsible for protecting Missouri investors from fraud and ensuring that companies comply with state securities law.
A spokeswoman for Kander told The Star last week that Stifel is under investigation by the securities division, although she couldn’t provide details because the investigation is ongoing. Since 2010, Stifel Financial has been investigated by the securities division at least three other times.
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Minnick’s long ties to the industry he’s now responsible for regulating, as well as to a company currently under investigation by the agency he now leads, have raised concerns about the division’s commitment to protecting Missouri investors.
“The fox is guarding the henhouse,” said Rep. Tracy McCreery, a St. Louis County Democrat who sits on the board of the Consumers Council of Missouri. “And that should be alarming.”
A spokesman for Ashcroft said Minnick has severed all formal ties with his former company. Two weeks before his hire became public, Minnick sold 10,000 shares of Stifel Financial stock, valued at more than $500,000. He sold an additional 3,400 shares, valued at $174,000, two weeks after his new job was announced. He appears to have sold his remaining $90,000 in stock shortly before the new year.
In a statement to The Star, Ashcroft praised Minnick, saying he brings to the job more than “30 years of experience as a prosecutor, a securities regulatory enforcement attorney, and general counsel for two (New York Stock Exchange) member firms. Missouri’s securities division will be better served with his broad and deep understanding of securities laws and regulations, which are designed to protect investors.”
A spokesman for Stifel declined to comment.
Each year the securities division, which is essentially the state-level version of the federal Securities and Exchange Commission, receives more than 400 complaints from Missouri investors. It serves as the “first line of defense against financial fraud,” said John Miller, a Kansas City securities attorney.
Miller said he has “high regard for David Minnick,” but there is still “an extra burden on him to demonstrate a commitment to investor protection.”
The director of the division under Kander had previously worked in the Missouri attorney general’s office, with a focus on consumer protection, antitrust and securities investigations and litigation.
Jason Kueser, a Lee’s Summit securities attorney, said the risk of Minnick’s hire is that “investor protection may not be given the same sense of urgency or importance.”
“You’re looking at someone who has been in the industry and counsel for investment firms for 15 to 20 years or more,” Kueser said. “You tend to build tendencies toward one side with that kind of background.”
Miller also expressed concern that many of the nonpartisan staff in the securities division lost their jobs under the new secretary of state, including some who had worked in the division for many years.
“If you gut the enforcement staff,” he said, “you’re gutting the priority of the division.”
Maura Browning, director of communications for Ashcroft, said staffing shake-ups are a routine part of the transition from one secretary of state to another.
“There were some employees that were let go, but many were retained,” Browning said. “Transitions every four years happen this way, and new people are brought on while others are let go.”
Kueser said having fresh eyes in the division could be beneficial. But he, too, worries about the loss of experience.
“A lot of times, with fraud or misdealing, you see repetition or patterns,” he said. “It may be a new type of investment, but the fraud is something you’ve seen before. Not having experience could mean not knowing what to look for, and that could be problematic.”