Department of Financial Institutions
Investors May Contact Firms About Auction Rate Securities Buybacks
FRANKFORT, Ky. (Nov. 14, 2008) – Retail investors whose supposedly “liquid” Auction Rate Securities (ARS) became frozen in the market in the last year have a limited time to get their money back from the firms that sold the securities.
The Kentucky Department of Financial Institutions (DFI) today reminded ARS investors of their redemption opportunities, which were reached as part of the settlements between securities regulators and several prominent Wall Street firms.
“Investors should be aware that the offers to repurchase their auction rate securities are not open indefinitely,” said DFI securities division director James Strode. “We urge any investor with questions about the repurchase program to contact the firm from which they originally purchased the auction rate securities.”
Several firms have established hotlines to respond to questions from customers concerning the terms of the settlements:
Bank of America 866-638-4183
Deutsche Bank 866-926-1437
Goldman Sachs 888-350-2857
JP Morgan 866-450-8470 (including Bear Stearns)
Merrill Lynch 888-706-1381
Morgan Stanley 800-566-2273
The other companies that have reached a settlement with states are Credit Suisse Securities and RBC Capital Corp. Investors who purchased auction rate securities from these firms and who have questions about the repurchase program should contact their broker directly.
In settlements reached with state and federal securities regulators, 11 firms have agreed in principle to repurchase more than $50 billion of auction rate securities. In consideration of the settlements, securities regulators agreed to terminate their investigations into the marketing and sale of auction rate securities to retail investors, nonprofit organizations and small businesses.
The investigations into possible violations were part of an ongoing state-led effort to address problems in connection with the offer and sale of ARS. Earlier this year, state securities regulators across the nation began receiving hundreds of investor complaints. As a result, in April, the North American Securities Administrators Association (NASAA), of which DFI is a member, announced the formation of a multi-state task force, comprised of securities regulators in 12 states, to investigate whether the nation’s prominent Wall Street firms had systematically misled investors when placing them in ARS securities.
“State securities regulators across the U.S. have worked hard to provide relief to investors whose funds were frozen in the ARS market,” Strode said. “When all is said and done, this will be the single largest repayment to investors in the history of the capital markets.”
The ARS markets froze in February 2008 triggering a flood of complaints from investors who could not withdraw money from their accounts. The widespread marketing of auction rate securities as cash equivalents, followed by the collapse of the ARS auction market left thousands of investors without access to their money.
DFI is an agency in the Public Protection Cabinet. It supervises the financial services industry by examining, chartering, licensing and registering financial institutions, securities firms and professionals operating in Kentucky. DFI’s mission is to serve the public through effective and efficient regulation that promotes consumer confidence and economic growth.