Cuomo keeps momentum in ARS probe

John O'Brien Aug. 15, 2008, 4:47pm


NEW YORK (Legal Newsline) - Wachovia has joined the group of auction rate securities sellers that has returned billions of dollars to investors as a result of New York Attorney General Andrew Cuomo's investigation.

Wachovia will buy back all illiquid ARS by Nov. 28, a total of more than $8.5 billion to investors across the country. Auction rate securities are investments that have their interest rates periodically reset by auction.

Wachovia will also pay $50 million to New York State and the North American Securities Administrators Association in civil penalties. Cuomo has spearheaded several recent settlements that have returned more than $35 billion to investors.

"At the heart of this investigation is the simple goal of returning billions of dollars back into the hands of investors, which in turn injects confidence into the entire market," Cuomo said.

"The industry is now taking responsibility for correcting a problem they helped create, and we'll continue working to make all investors whole."

The ARS market crashed in February, and Cuomo has reached agreements with Swiss bank UBS, Citigroup, JP Morgan Chase and Morgan Stanley.

Merrill Lynch appears to be Cuomo's next target. JP Morgan Chase, Wachovia and Morgan Stanley all reached agreements just a few days after Cuomo threatened legal action.

Like the other companies, Wachovia 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.

From Legal Newsline: Reach John O'Brien by e-mail at

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