New York AG signs agreements with two ARS firms‏

Nick Rees Jul. 8, 2009, 12:00am

Andrew Cuomo (D)

NEW YORK (Legal Newsline) - New York's attorney general has announced assurances of discontinuance with two securities firm that detail how they have and will provide liquidity to investors who purchased auction-rate securities.

"These historic settlements provided relief to cash-strapped consumers who held billions of dollars of illiquid investments after the auction-rate securities market collapsed in early 2008," Attorney General Andrew Cuomo said.

Credit Suisse Securities, LLC, and Merrill Lynch, Pierce, Fenner & Smith Incorporated's assurances of discontinuance are part of Cuomo's continuing effort to see that billions of auction-rate securities purchased by investors after 11 securities firms made misrepresentations in the marketing and sale of the securities are bought back.

Cuomo settled with the securities firms last year.

The Democratic attorney general began his investigation into the auction-rate securities market following the seizing of the auction market, which left investors holding billions of dollars in illiquid securities and penalty interest rates being paid by issuers as high as 20 percent.

Cuomo alleged that the firms told investors that the auction-rate securities were liquid, cash-equivalent investments and failed to disclose the extent that the auctions were propped up by the firms and the risk that that the auctions would fail if their support and that of broker-dealers was withdrawn.

The firms settled with Cuomo, neither admitting or denying the allegations, and agreed to buy back auction rate securities at par from individuals, charities and small to medium businesses. Institutional investors and those who are not eligible to participate in the buy-back were provided liquidity under terms.

Cuomo had previously announced assurances with Banc of America Securities LLC and Banc of America Investment Services, Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., JPMorgan Chase & Co., Morgan Stanley & Co. Inc. and RBC Capital Markets Corporation in June.

With the announcement of these two assurances of discontinuance, all 11 of the securities firms that Cuomo reached settlements with have now signed assurances of discontinuance, including Banc of America Securities LLC and Banc of America Investment Services, Inc., Citigroup Global Markets, Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., JPMorgan Chase & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Inc., RBC Capital Markets Corporation, UBS Securities LLC and UBS Financial Services LLC, and Wachovia Securities LLC and Wachovia Capital Markets LLC.

To date, more than $61 billion in investor buy-backs have taken place, the largest such buy-back on behalf of investors ever. Billions more in buy-backs have stemmed from additional obligations to facilitate liquidity solutions for those still holding auction-rate securities.

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Organizations in this Story

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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