NEWARK, N.J. (Legal Newsline) - New Jersey has signed a final consent order requiring Bank of America to complete or confirm repurchases of approximately $386 million in auction-rate securities from New Jersey clients.
The repurchase settles allegations that the firm's securities dealers failed to disclose to investors the risks of the auction-rate securities market.
"New Jersey investors became victims through no fault of their own when their auction rate securities at Bank of America were frozen," acting Attorney General Paula Dow said.
"This settlement fully protects these investors and holds Bank of America accountable for how it marketed the auction rate securities."
Auction-rate securities, which are often marketed and sold to investors as safe, liquid and cash-like investments are actually long-term investments that are subject to a complex auction process. That process failed in early 2008 and revealed illiquidity and lower interest rates than investors had been promised.
Bank of America will also pay $1,268,393 in civil penalties to the Bureau as part of the order. That amount represents the state's pro-rate share of a settlement negotiated by a multi-state task force of state regulators formed by the North American Securities Administrators Association.
This investigation was part of a larger, state-led effort addressing problems in connection with auction-rate securities investments following complaints received nationwide in early 2008 about the investments.
Twelve states formed a task force as a result to investigate whather a investors were systematically misled by prominent Wall Street firms when placing investors into auction-rate securities.