Prudential Securities, also formerly known as Prudential Securities Incorporated (PSI), was the financial services arm of the insurer,
Prudential Financial
Prudential Financial, Inc. is an American Fortune Global 500 and Fortune 500 company whose subsidiaries provide insurance, retirement planning, investment management, and other products and services to both retail and institutional customers t ...
. In 2003, Prudential Securities was merged into
Wachovia Securities
Wachovia Securities was the trade name of Wachovia's retail brokerage and institutional capital markets and investment banking subsidiaries. Following Wachovia's merger with Wells Fargo and Company on December 31, 2008, the retail brokerage beca ...
, a division of
Wachovia Bank
Wachovia was a diversified financial services company based in Charlotte, North Carolina. Before its acquisition by Wells Fargo and Company in 2008, Wachovia was the fourth-largest bank holding company in the United States, based on total asse ...
.
History
Prudential Securities traces its origins to the founding of the
Leopold Cahn & Co. brokerage
A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confu ...
and
investment bank
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing is ...
in 1879. In 1891, the firm was reorganized as
J.S. Bache & Co. after
Jules Bache
Jules Semon Bache (November 9, 1861 – March 24, 1944) was an American banker, art collector and philanthropist.
Early life
Julius Bache was born to a Jewish family in New York City. His father, Semon Bache é Bach(1826–1891), emigrated ...
was brought into the partnership.
In 1974, Bache merged with
Halsey, Stuart & Co., a Chicago-based investment bank founded in 1911. In 1952, Halsey, Stuart made headlines when its managing partner,
Harold L. Stuart, testified before the U.S. Supreme Court for the government's antitrust case against
Morgan Stanley
Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
and 16 other major investment banks. The fact that Halsey, Stuart was a significant investment banking firm, at the top of the IPO league tables in 1951 led some observers to suspect that they had provoked the government's antitrust suit.
In 1981, the company (then called Bache Halsey Stuart Shields) was acquired by
Prudential Financial
Prudential Financial, Inc. is an American Fortune Global 500 and Fortune 500 company whose subsidiaries provide insurance, retirement planning, investment management, and other products and services to both retail and institutional customers t ...
and renamed Prudential-Bache Securities. Prudential dropped the usage of the Bache name in 1991, renaming the division Prudential Securities.
In 1989, the firm acquired branch offices, client accounts and related assets from Thomson McKinnon when a deal to purchase Thompson McKinnon fell through a top 20 brokerage and investment banking firm.
Investor fraud
During the 1980s and 1990s, Prudential Securities Incorporated, was investigated by the
Securities and Exchange Commission (SEC) for suspected fraud.
During the investigation, it was found that PSI had defrauded investors of close to $8 billion, the largest fraud found by the SEC in US history to that point.
The SEC charged that Prudential allowed rogue executives to cheat customers on a large scale and blithely ignored a 1986 SEC order to overhaul its internal enforcement of securities laws.
In all, some 400,000 individual investors lost money on the deals.
Prudential Financial eventually settled with investors for $330 million in 1993.
Prudential said it would repay customers across the U.S. who lost money on the company's limited partnerships in the 1980s. In addition, the firm was required to pay another $41 million in fines.
The settlement also resolved investigations of the firm by the National Association of Securities Dealers and 49 states, including California, where 52,000 investors lost money in Prudential limited partnerships.
Further investigation was conducted by the SEC into the executives of the company to determine the extent of the fraud.
Merger with Wachovia
Prudential Financial combined its retail brokerage in a
joint venture
A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acces ...
with
Wachovia
Wachovia was a diversified financial services company based in Charlotte, North Carolina. Before its acquisition by Wells Fargo and Company in 2008, Wachovia was the fourth-largest bank holding company in the United States, based on total asse ...
to form
Wachovia Securities LLC on July 1, 2003. Wachovia purchased 62% of the joint venture, while Prudential retained the remaining 38%.
[ At the time, the new firm had client assets of $532.1 billion, making it the nation's third largest full service retail brokerage firm based on assets.] Prudential, which had been looking to sell its brokerage division, sought to use the joint venture's larger brokerage network to market its insurance products, while Wachovia sought to expand its investment banking business through the combination.
Remaining Business
Following the joint venture with Wachovia, Prudential Financial retained the commodities
In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a comm ...
and financial derivatives
In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be u ...
businesses. These businesses did not use the Bache name. However, in January 2003, Prudential Financial rebranded the two units under the Bache name, forming Prudential Bache. This unit was sold to Jefferies & Company
Jefferies Group LLC is an American multinational independent investment bank and financial services company that is headquartered in New York City. The firm provides clients with capital markets and financial advisory services, institutional br ...
parent Jefferies Group in 2011.
See also
* Bache & Co.
* Halsey, Stuart & Co.
References
{{Wells Fargo
Prudential Financial
Financial services companies established in 1981
Financial services companies disestablished in 2003
2003 mergers and acquisitions
Former investment banks of the United States
Defunct financial services companies of the United States
Defunct companies based in New York City