Auction-Rate Securities Probe Widens to Include Brokerages
Regulators looking into the auction-rate securities debacle have widened their probe to include nearly 40 brokerages, the Los Angeles Times reports.
Journalist Walter Hamilton writes that investigators with the Financial Industry Regulatory Authority launched on-site examinations this week at brokerages to determine whether the middlemen knew about the problems in the market and warned customers about the risks.
Brokerages such as Charles Schwab Corp., Fidelity Investments and E*Trade Financial Corp. have also received subpoenas from New York Attorney General Andrew Cuomo, Bloomberg News reports.
The news comes on the heels of the announcement that eight Wall Street banks have reached legal settlements with state and federal regulators over claims they misled investors about the safety of the instruments.
So far, Merrill Lynch & Co., Goldman Sachs Group, Deutsche Bank, Citigroup Inc., UBS Financial Services, Morgan Stanley, JPMorgan Chase & Co., and Wachovia Corp. have agreed to buy back frozen auction-rate securities from investors.
Auction-rate securities are municipal or corporate debt securities or preferred stocks that pay interest at rates set through periodic auctions. The instruments typically have long-term maturity dates or no maturity date.
In mid-February, the auctions for the investment instruments failed. That meant investors were unable to sell their securities.
Carey & Danis has filed class action lawsuits on behalf of persons who purchased auction-rate securities. Investors who wish to discuss their rights against any broker-dealer may contact Carey & Danis toll-free at 800-721-2519 or fill out our online contact form.
