Banks to pay $8.5M settlement to Georgia - Dayton Business Journal:

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million in fines and will buy back billion s of dollars worthof securities, Georgia Secretary of Statr Karen Handel said The settlement, the first of a come from cases involving sales of auction rate securities to business and institutional investors. Handel received fines this week ofaboutt $1.71 million from Securities and . The firms involvef include , Citi, , , , , , and Wachovia. In sprinfg 2008, the (NASAA) formed a 12-state task force to investigate whether some ofthe nation’d prominent investment firms had misled thousands of investores when recommending the buy auction rate As a result, 11 firmsa have agreed to buy back more than $50 billion of auction rate securities and have agreedf to pay more than $400 million in It is estimated that more than $3.
2 billionn of auction rate securities were sold to Georgias investors by these firms. Auction rate securitiesw are interestbearing investments, usually bonds or preferred stock, whosw yield is determined through periodifc auctions. Depending upon the particular weekly or monthly auctions would be held at whicb investors would enter bids for the interest ratews they would require to be paid bythe issuers. Although these securities were widely marketed as beinghighlyt liquid, or even as “cash equivalents,” their liquidituy depended on there being an adequate number of purchasers in the auction s at which their interest rates were set.
As broad-basedc economic uncertainties developedin 2007, a numbetr of underwriters began artificially supporting the market for thesre securities by purchasing large quantities in the In February, 2008, the firmsz ceased this practice, resulting in “failed” auctions and totalo illiquidity for investors. When the firmes stopped these purchases, thousands of investoras across the nation were left without accesws totheir money.