N.J. Bureau of Securities Participates in Auction Rate
NEWARK -- The N.J. Bureau of Securities, as part of a national task force with
other state regulators, has reached a settlement with Wachovia Securities (“Wachovia”) that will give thousands of affected clients, including New Jersey investors, access to $9 billion in funds that have been frozen in the auction rate securities (ARS) market.
In addition, as part of the settlement, Wachovia will pay a $50 million penalty to be apportioned among the states.
“This ARS settlement, the fifth reached this month, illustrates how state securities regulators have been working together on behalf of investors across the nation,” said Vincent J. Oliva, Chief of the New Jersey Bureau of Securities. “Our staff has actively participated in these investigations on behalf of New Jersey investors.”
The five settlements - with Wachovia, Morgan Stanley, J.P. Morgan, UBS and Citigroup - resulted in $235 million in civil penalties that the states will share.
Under the terms of the agreement announced today, Wachovia will repurchase illiquid ARS securities from all non-profit charities, as well as all individuals and businesses with account or household values up to $10 million, no later than November 28, 2008. All other investors will be able to redeem their ARS securities no later than June 30, 2009.
Wachovia will also:
- Fully reimburse all retail investors who sold their auction rate securities at a discount after the market failed in February 2008;
- Consent to a special, public arbitration procedure to resolve claims of consequential damages suffered by retail investors as a result of not being able to access their funds, in which Wachovia will not contest its liability related to the sale of ARS securities; and
- Reimburse all refinancing fees to municipal issuers who issued auction rate securities through Wachovia since August 1, 2007, and who refinanced those securities after the market failed.
The agreement follows an investigation led by the Office of the Missouri Secretary of State into complaints from investors that Wachovia misled them by portraying ARS securities as cash equivalents. The ARS markets froze in February this year, leaving thousands of investors across the country without access to their money.