- The Office of the Attorney General through
its Bureau of Securities today signed a final
Consent Order that requires Deutsche Bank
Securities, Inc. to complete or confirm its
repurchase of auction-rate securities from
New Jersey clients to settle allegations that
the firm’s securities dealers failed
to disclose risks of the auction-rate securities
The New Jersey Bureau of Securities
(NJBOS) led the North American Securities
Administrators Association’s investigation
into Deutsche Bank Securities’ auction-rate
securities practices. That investigation led
to today’s final settlement.
“I commend our Bureau
of Securities for its leadership in investigating
Deutsche Bank Securities’ business practices,”
Attorney General Anne Milgram said. “The
New Jersey investors whose auction-rate securities
investments were frozen during last year’s
meltdown will now have free access to their
funds, under terms of this settlement.”
Under this settlement, individual
investors in New Jersey as defined in the
Consent Order are eligible to have approximately
$60 million in auction-rate securities repurchased.
Although marketed and sold
to investors as safe, liquid, and cash-like
investments, auction-rate securities are actually
long-term investments subject to a complex
auction process that failed in early 2008,
revealing illiquidity and lower interest rates
than investors were promised.
Bureau of Securities led the Deutsche Bank
Securities task force that combined and coordinated
investigative resources,” said David
Szuchman, Consumer Affairs Director. “The
settlement makes investors whole and restores
their hard-earned monies.”
“The Bureau of Securities has sought
to secure much needed relief for investors
stuck with these unsuitable and illiquid products,”
said Marc B. Minor, New Jersey Bureau of Securities
chief. “I am pleased that Deutsche Bank
Securities has agreed to do what’s right
by offering to repurchase clients’ positions.”
This is the second auction-rate
securities settlement announced by the NJBOS,
following Citigroup last month.
The order also requires Deutsche
Bank Securities to pay a $1,057,350.69 civil
penalty to New Jersey. This amount represents
the state’s pro-rata share of a $15M
settlement negotiated by the multi-state task
force of state regulators formed by the North
American Securities Administrators Association.
During the investigation,
the Bureau of Securities discovered that Deutsche
Bank Securities’ dealers failed to adequately
inform customers and train employees on the
risks associated with buying auction-rate
The investigation into Deutsche
Bank Securities’ role in the marketing
of auction-rate securities is part of a larger
state-led effort to address problems in connection
with auction-rate securities investments.
Early in 2008, state offices began receiving
complaints from investors throughout the country.
As a result, in April, 12 states, including
New Jersey, formed a task force to investigate
whether the nation's prominent Wall Street
firms had systematically misled investors
when placing them in auction-rate securities.
The Consent Order announced
today sets forth the allegations by the Bureau
and the terms that were agreed to in principle
in August, 2008.
The Bureau thanks the Delaware
Division of Securities and its staff for their
assistance and support in the investigation
of Deutsche Bank Securities.
NJBOS Investigating Attorney
Peter C. Cole led New Jersey’s efforts
in securing this settlement and protecting
Garden State investors.
Bureau of Securities can be contacted toll-free
within New Jersey at 1-877-I-INVEST
(1-877-446-8378) or from outside New Jersey
at 973-504-3600. The Bureau's web site is
located at www.njsecurities.gov.