Updated from 1:40 p.m. EST
were under pressure Thursday following word that securities regulators are looking into some Philadelphia municipal bond deals the company managed.
A spokesman for Pennsylvania Treasurer Barbara Hafer said the treasurer is "aware of an investigation" by the
Securities and Exchange Commission
that could involve Commerce Bank.
The investigation is related to a broader federal inquiry of municipal bond work in Philadelphia. Federal agents have subpoenaed records from a number of banks, including Commerce Bank, that worked on bond deals for Philadelphia.
The larger inquiry is believed to be looking into the activities of Philadelphia Mayor John Street as well.
A person familiar with the inquiry said two SEC investigators interviewed the state treasurer earlier this month and during that session asked questions mainly about bond work done by Commerce Bank.
In an SEC filing Thursday afternoon, Commerce said it wasn't aware of any formal investigation.
"However, as you might expect, we have received an informal non-public confidential inquiry from the SEC," the bank said. "The SEC staff has advised us that its inquiry should not be construed as an expression of opinion that any violation of law has occurred. We are fully cooperating with the SEC and are not at liberty to comment further."
Commerce said it believes it's in full compliance with all applicable laws and regulations and noted that underwriting revenue from Commerce Capital Markets are about 1% of the company's overall revenue.
"If we do get a formal notice of investigation, which we don't have, we will make it public," said Ed Jordan, a bank spokesman.
Jordan confirmed that Commerce Bank received a federal subpoena a few months ago about its bond deals. But Jordan noted that many banks that did work for Philadelphia received similar subpoenas.
Meanwhile, news of the stepped-up SEC inquiry took a bite out of Commerce Bank's shares. The heavily shorted stock was recently down $2.57, or 5.1%, to $47.71.
Jack Micenko, a Lehman Brothers bank analyst, said he sees little earnings impact from the SEC inquiry, but that he expects the news to unsettle investors and drive down the stock. Commenting on the SEC inquiry, he said, "the impact to earnings and future growth appears limited."