Settlement reached in Michigan auction rate security scandal
LANSING, Mich. (Legal Newsline) - Michigan Attorney General Mike Cox and the Office of Financial and Insurance Regulation have reached a settlement with Comerica Bank that requries the bank buy back $1.46 billion in auction rate securities.
According to the terms of the settlement, Comerica Bank will be required to offer full buybacks to any customer who purchased an auction rate security from Comerica Securities, a subsidiary of Comerica Bank.
After the auction rate securities market collapsed this year, consumers' access to their accounts was frozen. Auction rate securities are investments that have their interest rates periodically reset by auctions.
"This settlement will allow citizens to access their money, while helping stabilize an already nervous financial market," Cox said.
Nearly $1 billion of the nationwide $1.46 billion Comerica customers hold in auction rate securities nationwide are held by Michigan citizens.
Represented as a safe and secure investment option in lieu of money market investments, customers were told the auction rate securities had the same liquidity as cash, Cox said.
When the market collapsed, however, investors found out that their account were frozen and that they no longer had access to their money.
Comerica will also have to pay the State of Michigan a civil penalty of $10,000 and $100,000 to the Michigan Investor Protection Trust Fund.
"This settlement represents a major victory for Michigan investors who bought auction rate securities through Comerica Securities," said Office of Financial and Insurance Regulation Commissioner Ken Ross.
"Our agreement ensures that all Michigan consumers who made these investments will be able to put this nightmare behind them."
The settlement also allows the Attorney General to go to court to enforce the buyback program and, if warranted, to pursue criminal charges.
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