Ameritrade Settles Securities Case For $456m

 

Tuesday, Jul 21,2009, 1:22:58 PM   Click:

Brokerage TD Ameritrade agreed Monday to pay $ 456 million to settle a dispute involving the marketing of a class that debt eventually paralyze investors.

But New York State Attorney General Andrew Cuomo, who introduced the color, "said another firm, Charles Schwab, refused to settle claims relating to the sale of rate securities auction (ARS) for individuals, charities, non-profit, small businesses and institutions.

Cuomo said the office has joined TD Ameritrade 11 underwriting of securities and broker rival Fidelity Investments in the settlement of his claim that they "distorted the rate auction securities liquid, short-term investments," according a statement.

The office said the settlements by 20 firms with his office and other regulators have resulted in more than $61 billion in buybacks of the securities.

As part of the settlement, Omaha, Neb.-based TD Ameritrade said it will repurchase all auction-rate securities it sold before Feb. 13, 2008. TD Ameritrade will buy the securities from retail investors with accounts of $250,000 or less within the next 75 days.

The firm said it will repurchase the remaining securities by March 2010, and will reimburse investors who sold at a loss after the market failed.

The auction-rate securities market involved buying and selling long-term bonds that resembled corporate debt. Hospitals, cities and corporations sold the securities at weekly or monthly auctions, where interest rates were reset each time.


Many investors had treated ARS like cash investments, but the $330 billion market collapsed in early 2008 as the credit crisis took a turn for the worse.

Cuomo's office said it is pushing auction-rate securities brokers and underwriters to repurchase them from investors who were left with steep losses.

Schwab objects: Cuomo's office also announced "imminent legal action" against Charles Schwab for alleged deceptive selling of auction-rate securities as safe.

"It is disturbing that Charles Schwab, who had been holding itself out as an industry expert, has stonewalled its customers," Cuomo said. "Today's notice should send a signal that if Charles Schwab will not stand by its customers, this office will."