More settlements in Cuomo's ARS investigation

John O'Brien Aug. 14, 2008, 1:30pm


NEW YORK (Legal Newsline) - More sellers of auction rate securities have cooperated with New York Attorney General Andrew Cuomo, who can now boast that he's helped return $27 billion to investors.

Cuomo reached agreements with JP Morgan Chase and Morgan Stanley Thursday to return a total of more than $7 billion to investors Cuomo claims were misled about the liquidity of auction rate securities before the market crashed earlier this year.

Auction rate securities are investments that have their interest rates periodically reset by auctions.

"Returning billions of dollars back to investors not only protects their interest but also increases confidence in the entire market," Cuomo said. "Today's multi-billion dollar agreements are the latest victories for investors seeking relief from the collapse of the (ARS) market, which has left a stranglehold on billions of dollars."

Cuomo already reached similar agreements with Citigroup and Swiss bank UBS to return a total of nearly $20 billion to investors. On Monday, Cuomo alerted JP Morgan Chase and Morgan Stanley that they, along with Wachovia, were next.

"The industry is taking responsibility for correcting a problem they helped create, and that's a good thing," Cuomo said. "The fundamental goal has been to return money into the hands of investors, and that's what these deals do."

Morgan Stanley will pay $35 million in civil penalties, and JP Morgan Chase must pay $25 million.
The companies must also consent to a public arbitration procedure to resolve claims of consequential damages suffered by retail investors as a result of not being able to access their funds.

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Organizations in this Story

New York Attorney General
99 Washington Square
Albany, NY 12205

Morgan Stanley
1585 Broadway, New York, NY 10036, United States
New York, NY 10036

Citibank Building, New York, NY, United States
New York, NY 10022

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