NEWARK
– Attorney General Paula T. Dow, Acting
Consumer Affairs Director Sharon Joyce and
Bureau of Securities Chief Marc B. Minor
today announced that the Bureau has signed
a final Consent Order that requires Merrill
Lynch to complete or confirm its repurchase
of auction-rate securities (ARS) from New
Jersey clients to settle allegations that
the firm’s securities dealers failed
to disclose risks of the ARS market.
“This
settlement with the Bureau of Securities
holds Merrill Lynch accountable for how
it marketed auction rate securities without
fully revealing the risks to investors,”
Attorney General Dow said.
Although often marketed and sold to investors
as safe, liquid, and cash-like investments,
ARS are actually long-term investments subject
to a complex auction process that failed
in early 2008, resulting in illiquidity
and lower interest rates than investors
were promised.
“State
regulators banded together, combined their
resources and worked to hold investors harmless
in the wake of this ARS crisis,” Acting
Director Joyce said. “The New Jersey
Bureau of Securities continues its vital
work to safeguard the hard-earned monies
of investors during these difficult financial
times.”
“The
myriad of investments available to consumers
can be confusing and those offering products
are obligated to fully disclose all relevant
terms and conditions to potential investors,”
said Bureau Chief Minor. “We will
continue to act at the direction of the
Attorney General to protect investors when
our state securities laws and regulations
are violated.”
The
consent order requires Merrill Lynch to
pay $4,871,620 in civil penalties to the
Bureau. The fine 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).
The
investigation into Merrill Lynch’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, 12
states, including New Jersey, formed a task
force to investigate whether the nation's
Wall Street firms had systematically misled
investors when placing them in auction rate
securities.
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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