Credit Suisse repurchasing auction-rate securities

Bryan Cohen Aug. 3, 2011, 2:19pm


NEWARK (Legal Newsline) - New Jersey Attorney General Paula Dow announced a final consent order Wednesday with Credit Suisse Securities LLC to repurchase auction-rate securities from New Jersey clients to settle allegations.

Dow and the New Jersey Bureau of Securities alleged that the company had sold ARS without disclosing the known risks of the ARS market. Although ARS were marketed and sold to investors as safe, liquid and cash-like investments, they were actually long-term investments subject to a complex auction process that failed in early 2008, revealing illiquidity and lower interest rates than investors were promised, Dow says.

Credit Suisse sold approximately $275.6 million in ARS to institutional and retail investors in New Jersey during the same period covered by the settlement. The bureau alleged that Credit Suisse failed to reasonably supervise its agents. The company will pay $1,057,996 in civil penalties to the state under terms of the consent order.

"Financial firms must inform potential investors of all known risks before investors decide where to put their hard-earned dollars," Dow said. "When such disclosure does not occur, investors can suffer harm that they did not bargain for. We've acted in this matter to make investors whole and to ensure proper disclosure occurs going forward."

The consent order represents the 13th settlement that the bureau has reached with firms that sold ARS to New Jersey investors. To date, more than $3 billion of these assets have been repurchased or offered to be repurchased from state investors as part of settlements with firms that sold and marketed these products.

Early in 2008, state offices started to receive complaints from investors throughout the county in connection with ARS investments.

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