* Complaint alleges misrepresentation of ARS risks

* Calls for license suspension of Stifel in Colorado.

Colorado's securities regulator said it filed a complaint against a Stifel Financial Corp unit, alleging the company did not inform Colorado investors about the risks of auction rate securities (ARS) and "falsely" represented them as liquid, short-term investments. In the complaint, the securities division of the Colorado Department of Regulatory Agencies alleged that Stifel, Nicolaus & Co violated the Colorado Securities Act by making false representations to investors, and engaged in unfair and dishonest dealings by making unsuitable recommendations to its customers.  Stifel brokers compared the ARS to money market funds, selling them as suitable for cash management purposes, or otherwise telling customers they would always be able to retrieve their cash, the regulator said.

The regulator also alleged that in a number of ARS issues, Stifel acted as an underwriter and was aware of the liquidity risks of these securities. The administrative complaint is before an administrative law judge, and seeks suspension or revocation of the license of Stifel Nicolaus in Colorado, it said. Shares of the company fell more than 3 percent to $53.07 in afternoon trade on the New York Stock Exchange.

(Reuters)