Auction-Rate Securities Investigations by SEC and NY Attorney General Are Ongoing

The Securities and Exchange Commission and the New York Attorney General’s office are still investigating whether auction-rate securities market participants knew they were misleading investors about the complexity and liquidity of debt instruments leading up to the market collapse in 2008. Officials for both agencies told BNA about the ongoing probes last month.

It was these misrepresentations to investors that prompted the Financial Industry Regulatory Authority to issue a concept proposal that, should it become a rule, would hold research analysis and reports that analyze debt securities accountable to FINRA requirements. A federal regulator told BNA that the SRO is concerned about misrepresentations that may have been made to retail investors as early as in late 2007 when, even as institutional investors were buying less ARS-causing the market to lose liquidity-ARS sellers were being pushed by underwriters to get retail clients to buy the securities under the guise that the bonds were very liquid and like cash. Also, underwriters and others allegedly knew that the market conditions were headed toward illiquidity despite their claims that the instruments were highly liquid.

The New York Attorney General’s office reported that says that as of last month, financial institutions have agreed to repurchase $60 billion of the ARS. The financial firms have also agreed to pay about $597 million in fines. Among the investment banks that the SEC has reached settlement agreements with are Citigroup Inc. (C), Wachovia Securities LLC, Royal Bank of Canada subsidiary RBC Capital Markets Corp., UBS AG, Merrill Lynch & Co., TD Ameritrade Online Holding Corp. (AMTD, Bank of America Corp. (BAC), and Deutsche Bank AG.

Related Web Resources:
SEC, New York Continuing ARS Probes;
Retail ARS Risk Behind FINRA Proposal, BNA, March 23, 2011
Auction Rate Securities, SEC

More Blog Posts:
Class Auction-Rate Securities Lawsuit Against Raymond James Financial Survives Dismissal, Stockbroker Fraud Blog, September 27, 2010
Securities Fraud Lawsuit Against Calamos Investments Filed on Behalf of Calamos Convertible Opportunities and Income Fund Shareholders, Stockbroker Fraud Blog, September 17, 2010
Raymond James Must Pay $925,000 Over Auction-Rate Securities Dispute, Institutional Investor Securities Blog, September 1, 2010
Our stockbroker fraud lawyers are representing investors who invested in auction-rate securities because they were told that the financial instruments were liquid. Contact our securities fraud law firm today.

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