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NEWARK
– The Office of the Attorney General
through its Bureau of Securities has signed
a final Consent Order that requires RBC
Capital Markets Corp. to complete or confirm
its repurchase of auction-rate securities
(ARS) from New Jersey clients to settle
allegations that the firm’s securities
dealers sold ARS without disclosing known
risks of the ARS market.
Under the terms of the settlement, RBC will
repurchase all of the ARS, approximately
$51 million, that it sold to New Jersey
investors. Although marketed and sold to
investors as safe, liquid, and cash-like
investments, the ARS were 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.
“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. “State securities
regulators joined forces to resolve this
matter on behalf of New Jersey investors
and we continue to be on the frontlines
in protecting investors and their hard-earned
savings.”
The order also requires RBC to pay a $51,724
civil penalty to New Jersey. This amount
represents the state’s pro-rata share
of a settlement negotiated by a multi-state
task force of state regulators formed by
the North American Securities Administrators
Association (NASAA).
During
the investigation, regulators discovered
that RBC’s securities dealers failed
to adequately inform customers on the risks
associated with buying auction-rate securities.
The
investigation into RBC’s role in the
marketing of auction rate securities is
part of a larger state-led effort to address
problems in connection with ARS 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 certain Wall Street
firms had systematically misled investors
when placing them in auction rate securities.
The Consent Order sets forth the allegations
by the BOS and the terms that were agreed
to in principle in October, 2008.
BOS Investigating Attorney Peter C. Cole
led New Jersey’s efforts in securing
this settlement and protecting Garden State
investors.
The
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.
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