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Attorney General Andrew M. Cuomo today announced a settlement under which broker-dealer Oppenheimer & Co. Inc. (“Oppenheimer”) will restore $31 million to investors across New York State and the nation holding illiquid auction rate securities. Today’s action is the latest step in the Attorney General’s ongoing effort to restore liquidity to investors caught in the collapse of the auction rate securities market.
“From the beginning of our investigation into the auction rate securities market, our objective has been to bring relief to investors stuck with illiquid auction rate securities,” said Attorney General Cuomo. “Today’s settlement with Oppenheimer is an important first step in bringing justice to investors who were promised a cash-equivalent investment, while helping to further restore investor confidence.”
A nationwide investigation by the Attorney General into the auction rate securities market found that auction rate securities had been marketed and sold as safe, cash-equivalent products, when in fact they faced increasing liquidity risk. With today’s settlement, the Attorney General’s investigation has resulted in settlements with fourteen broker-dealers, providing over $60 billion in investor buybacks. These settlements have affected thousands of consumers nationwide and represent the largest return on behalf of investors ever.
Under the Attorney General’s settlement, Oppenheimer has committed to use a significant amount of its available resources to purchase illiquid auction rate securities from individuals, charities, non-profits, and small businesses and institutions. Since the value of its customers’ frozen auction rate securities exceeds the resources Oppenheimer can presently pledge to a buy-back offer under regulatory requirements, the settlement provides for an important first step in restoring liquidity to investors. Oppenheimer has committed to extending additional buy-back offers as soon as it obtains additional capital or access to credit. The Attorney General retains the right to charge Oppenheimer under New York’s Martin Act should it determine that Oppenheimer’s future efforts are insufficient.
As a result of the settlement, more than 1,246 accounts nationally and 230 accounts in New York can obtain an immediate cash benefit liquidity. All individuals, charities, and small businesses with accounts of less than $1 million at Oppenheimer will be eligible for $25,000 in liquidity.
In addition to Oppenheimer, the other firms that have agreed to buy-backs to date as part of the Attorney General’s investigation are 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.; Fidelity Investments; Goldman Sachs & Co.; JPMorgan Chase & Co.; Merrill Lynch; Pierce, Fenner & Smith Inc.; Morgan Stanley & Co. Inc. and RBC Capital Markets Corporation; TD Ameritrade, Inc.; UBS Securities LLC and UBS Financial Services, Inc.; and Wachovia Securities LLC and Wachovia Capital Markets Inc.
The Attorney General thanked the North American Securities Administrators Association and its multi-state Auction Rate Securities Task Force for their efforts in achieving today’s settlement. The Attorney General also thanked the Georgia Secretary of State’s Securities Division for their assistance in the investigation.
This investigation was conducted by Assistant Attorneys General Thomas Teige Carroll, Harriet Rosen, and Daniel Sangeap, under the supervision of Special Deputy Attorney General for Investor Protection David A. Markowitz.
Attorney General Cuomo’s auction rate securities investigation continues.
The settlement can be found online at www.ag.ny.gov/media_center/2010/feb/OppenheimerAOD.pdf.
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