More settlements in Cuomo's ARS investigation

By John O'Brien | Aug 14, 2008


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.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

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