Wednesday, June 3, 2009
The SEC today announced finalized settlements with Bank of America, RBC Capital Markets, and Deutsche Bank to resolve SEC charges that the firms misled investors regarding the liquidity risks associated with auction rate securities (ARS) that they underwrote, marketed, or sold. These settlements provide nearly $6.7 billion to approximately 9,600 customers who invested in ARS before the market for those securities froze in February 2008.
Previous ARS settlements include Wachovia, Citigroup and UBS and a settlement in principle with Merrill Lynch.
In addition, New York Attorney General Andrew M. Cuomo today announced Assurances of Discontinuance with Banc of America Securities LLC and Banc of America Investment Services, Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., JPMorgan Chase & Co., Morgan Stanley & Co. Inc. and RBC Capital Markets Corporation relating to the auction rate securities settlements reached last summer. The Assurances detail how the firms have and will continue to provide liquidity to investors who purchased auction rate securities.
The settlements, which are subject to court approval, will restore approximately $4.5 billion in liquidity to Bank of America customers, $800 million in liquidity to RBC customers, and $1.3 billion in liquidity to Deutsche Bank customers.
Without admitting or denying the SEC's allegations, Bank of America, RBC and Deutsche Bank agreed to be permanently enjoined from violations of the broker-dealer fraud provisions and to comply with a number of undertakings, some of which are set forth below.
- Each firm will offer to purchase ARS at par from individuals, charities, and small or medium businesses that purchased those ARS from the firm, even if those customers moved their accounts.
- Each firm will use its best efforts to provide liquidity solutions for institutional and other customers and will not take advantage of liquidity solutions for its own inventory before making those solutions available to these customers.
- Each firm will pay eligible customers who sold their ARS below par the difference between par and the sale price of the ARS.
Investors should review the full text of the consents executed by Bank of America, RBC and Deutsche Bank. Customers with questions about these settlements may contact Bank of America, RBC, or Deutsche Bank through the firms' Web sites or at the following toll-free telephone numbers:
- Bank of America: 1-866-638-4183
- RBC: 1-866-876-5469 or Web site
- Deutsche Bank: 1-866-926-1437
Bank of America, RBC and Deutsche Bank also will be permanently enjoined from violating the provisions of Section 15(c) of the Exchange Act of 1934, which prohibit the use of manipulative or deceptive devices by broker-dealers. The Commission reserves the right to seek a financial penalty