A St. Louis County judge on Tuesday overturned state orders that had temporarily forced Waddell & Reed to close its 17 offices in Missouri, according to the Kansas City Star.
Judge Patrick Clifford in the Circuit Court of St. Louis County blocked an order that suspended the company's ability to do securities business in the state for two weeks. The suspension began Monday after Missouri Securities Commissioner David Cosgrove took action against the company Friday on the grounds that it had engaged in "dishonest and unethical practices."
His order cited and challenged hundreds of variable annuity exchanges the company recommended to Missouri customers more than three years ago.
The annuity exchanges at Overland Park-based Waddell & Reed have led to formal regulatory complaints, lawsuits against former affiliated companies in Alabama and ongoing inquiries by at state regulators in South Dakota, Kansas and Alabama.
The company defended the exchanges, saying Tuesday it welcomed "the opportunity to present evidence demonstrating the benefits achieved by the clients as a direct result of the transactions" in Missouri.
The NASD charged in January 2004 that the company recommended 6,772 of the variable annuity exchanges without ensuring that all of them were suitable for customers. The exchanges generated $37 million in commissions for the company and cost customers $9.8 million in unnecessary fees, the NASD said.
Missouri's order said customers in the state paid $1.6 million in commissions and $400,000 in fees triggered by the exchanges. Missouri's commissioner suspended Waddell & Reed without a hearing and without allowing the company to answer the charges.
Clifford blocked that order, saying it would result in immediate harm to the company, violated the company's constitutional right to due process, posed a risk of harm to its 25,000 Missouri customers and was not in the public interest.