Wachovia Corp. has said that the Securities and Exchange Commission in USA has opened a formal investigation into the company's relationship with its independent auditor, KPMG LLC .
Wachovia, the Charlotte, N.C.-based financial services company, said in its third-quarter financial statement filed with the SEC that the agency's previously reported inquiry became a formal investigation Oct. 21.
The SEC has requested that the company produce documents about its referral of clients to KPMG dating back to 1997. It is examining whether those referrals compromised KPMG's independence.
Wachovia and KPMG both have denied that the auditor's independence was jeopardized. Wachovia said in the SEC filing that it continues to cooperate with the SEC's investigation.
Also in Friday's quarterly report, Wachovia said that the SEC and the National Association of Securities Dealers informed the company's Wachovia Securities LLC unit that they may pursue enforcement measures as part of investigations into mutual-fund discounts.
The regulators said those measures may include a cease-and-desist order and other administrative penalties. They invited Wachovia Securities to make a Wells submission to explain why such enforcement proceedings aren't necessary, according to Friday's SEC filing.
The SEC and NASD are investigating whether brokerage firms have failed to provide their customers with breakpoint discounts — volume discounts for customers who make large mutual-fund purchases.
In 2001 and 2002, Wachovia Securities failed to provide customers with $4 million to $5 million in the discounts, Wachovia estimated in Friday's filing.