N.J. reaches ARS settlement

By Nick Rees | Feb 8, 2010


NEWARK, N.J. (Legal Newsline) - A final consent order has been secured by acting New Jersey Attorney General Paula Dow requiring RBC Capital Markets, Corp., to complete or confirm its repurchase from New Jersey clients of auction-rate securities.

The repurchase of securities settles allegations that RBC Capital's securities dealers sold the auction-rate securities without dicsloing known risks of the auction-rate securities market.

RBC, under terms of the settlement, will repurchase all of the approximately $51 million of auction-rate securities sold to New Jersey investors, which were marketed and sold to investors as safe, liquid and cash-like investments.

The securities were actually long-term investments that were subject to a complex auction process that, after failing in early 2008, revealed illiquidity and lower interest rates than investors were promised.

RBC will also pay a $51,724 civil penalty to New Jersey as part of the final consent order. The civil penalty represents the state's pro-rata share of a settlement negotiated by a multi-state task force of state regulators formed by the North American Securities Administrators Association.

The consent order follows an investigation by regulators that revealed that RBC's securities dealers had failed to adequately inform customers of the risks associated with buying auction-rate securities.

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