On November 16, 2006, Financial Security Assurance Holdings Ltd. (“FSAH”) received subpoenas from the Securities and Exchange Commission and the Antitrust Division of the U.S. Department of Justice issued in connection with ongoing civil and criminal investigations of brokers, financial institutions and bond insurers suspected of bid rigging awards of municipal guaranteed investment contracts (“GICs”). Click here to read a copy of FSAH’s 8-K disclosing this information.

The investigations center on allegations of bid rigging in the process that awards the right to invest money raised by GICs. A familiar allegation is that parties submitted phony bids to let one financial institution obtain the rights to invest GIC proceeds and, in return, those that submitted phony bids would be awarded rights later. Authorities are also investigating whether kickbacks were paid to obtain the awards.

FSAH, which issues municipal GICs and other financial products through its Financial Products segment, stated in its 8-K that it “is not aware of any specific allegations concerning its own practices.” FSAH also stated that it “is not in the GIC brokerage business.”

On February 4, 2008, FSAH received a Wells Notice from the staff of the Philadelphia Regional Office of the SEC relating to its investigation the GIC bid process. FSAH reports that the Wells Notice indicates the SEC staff is considering recommending that the SEC authorize the staff to bring a civil injunctive action and/or institute administrative proceedings against FSAH, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. Click here to read a copy of FSAH’s 8-K disclosing this information.