Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, April 22, 2010

FINRA Settles ARS Charges with HSBC Securities (US) & US Bancorp Investments

FINRA settled charges with two additional firms relating to the sale of auction rate securities (ARS) that became illiquid when auctions froze in February 2008 – HSBC Securities (USA) and US Bancorp Investments, Inc.  To date, FINRA has concluded ARS-related settlements with 14 firms, imposing a total of nearly $5 million in fines. Firms that have reached settlements with FINRA have returned more than $2 billion to investors. Investigations continue at a number of additional firms.

HSBC, which was fined $1.5 million, had by July 2008 repurchased more than 90 percent of its then current customers' ARS holdings and in October 2008 it offered to repurchase all of the remaining ARS held in those customers' HSBC accounts. In total, HSBC repurchased more than $562 million of ARS held by its customers. As part of the settlement announced today, HSBC has agreed to offer to repurchase additional ARS sold to certain customers who transferred accounts before its previous buy-backs and to customers who chose not to participate in its prior offers.

US Bancorp Investments, which was fined $275,000, has already completed a repurchase of more than $150 million of ARS held in customer accounts.

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