States Expand Probe Into Auction-Rate Securities
State securities regulators are investigating auction-rate securities and are coordinating their efforts to help investors “who can’t access funds that their brokers placed in these complex investment products,” according to an article by Kevin Kingsbury in The Wall Street Journal. North Dakota Securities Commissioner Karen Tyler, the president of the North American Securities Administrators Association, said “If violations are uncovered, then state securities regulators will seek appropriate remedies, including a much stronger commitment from Wall Street to provide their retail clients with an acceptable solution.”
Several states have had investigations into the sales of auction-rate securities under way since February. They are being handled by each state individually but are being coordinated through a task force headed by Bryan Lantagne, the head of the Massachusetts Securities Division. The other states involved include Florida, Georgia, Illinois, Missouri, New Hampshire, New Jersey, Texas, and Washington.
According to Tyler, “Our focus is to determine what conduct took place at the point of sale – what was potentially misrepresented and omitted – and our goal is securing for investors access to their cash as requested. If the product was represented to be a cash equivalent going in, it must be treated as a cash equivalent coming out.”
Massachusetts subpoenaed UBS, Merrill Lynch, and Bank of America last month for documents and testimony on how they sold auction-rate securities to retail investors. On Friday, April 11, the SEC asked brokerage firms for the names of customers who held auction-rate securities and their total value as of December 31, 2007, and February 29, 2008, in addition to the amounts held by customers and in firm inventory as of March 31, 2008.
No one knows whether this effort by the states to force broker-dealers to inject some liquidity into the auction-rate market by means of regulatory investigation will work. Any unfreezing of this market and relief to investors, however, would be useful.
Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their auction-rate securities investment problems. For further information, please contact us.
