JPMorgan Chase settles N.J.'s ARS lawsuit

By Keith Loria | Sep 9, 2010


NEWARK, N.J. (Legal Newsline) - New Jersey Attorney General Paula Dow announced on Thursday that she has issued a final consent order against JPMorgan Chase & Co.

The order settles allegations that the company's securities dealers failed to disclose the risks of the auction-rate securities market to New Jersey residents.

The order requires the company to complete or confirm its repurchase of approximately $91,250,000 in auction-rate securities from New Jersey investors, many of whom were allegedly told that the securities were safe, liquid and cash-like investments.

Auction-rate securities are investments that have their worth periodically changed by an auction process. The ARS market failed in early 2008.

State regulators alleged that from the fall of 2007 through February 2008, JPMorgan inappropriately marketed and sold auction-rate securities without explaining all of the risks of illiquidity associated with the product to its investors.

"New Jersey investors, whose ARS investments were frozen as a result of JPMorgan's role in these auction market failures, will now regain access to their funds under terms of this settlement," Dow said. "Our Bureau of Securities continues to work with other state regulators to protect investors and ensure the return of their monies."

Under terms of the final consent order, JPMorgan must also pay $1,149,028.56 to New Jersey, which represents the state's pro-rata share of a settlement negotiated by a multistate task force of state regulators formed by the North American Securities Administrators Association.

This is just the latest action against firms involved with the ARS market. The Bureau of Securities has issued six similar consent orders that have generated more than $1 billion in ARS repurchases for investors living in New Jersey.

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