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NEWARK
-- New Jersey Attorney General Anne Milgram
announced today that the N.J.
Bureau of Securities, as part of a national
task force with other state regulators,
and the Securities and Exchange Commission
reached a settlement with UBS Securities
LLC and UBS Financial Services, Inc. that
will give thousands of UBS clients, including
New Jersey investors, access to billions
of dollars in funds that have been frozen
in the auction rate securities (ARS) market.
Under the settlement, UBS
will -- prior to January 2009 -- buy back
all illiquid auction rate securities, totaling
more than $11 billion, from all UBS retail
customers, charitable organizations and
small to mid-sized businesses. For those
retail customers and charitable organizations
with less than $1 million on deposit, the
settlement requires UBS to buy back the
securities before October 31, 2008.
Additionally, UBS will pay
a $75 million penalty to the States, with
a pro-rata share payable to New Jersey,
as well as an additional $75 million penalty
to New York State. The penalties reflect
issues arising from UBS’ sale of auction
rate securities to investors.
The settlement concludes
an investigation into allegations that UBS
misled its clients by falsely assuring them
that ARS securities were as safe and liquid
as cash. The N.J. Bureau of Securities played
a significant role by investigating specific
complaints originating from New Jersey investors
and taking an active role in the settlement
negotiations.
The ARS markets froze in
February this year, triggering a flood of
complaints from investors who could not
withdraw money from their accounts. States,
including New Jersey, received complaints
from a wide range of investors who suffered
significant financial damage because the
money they were told was liquid was tied
up in the frozen ARS market.
“New Jersey’s
participation in this national investigation
reflects its continued commitment to protect
New Jersey investors, and the settlement
provides necessary relief to investors who
were mislead into believing that their auction
rate security investments were liquid and
as safe as cash” said Attorney General
Milgram.
Consumer Affairs Division
Director David Szuchman stated that, “This
settlement with UBS resulted from a well-coordinated
national effort that New Jersey participated
in.”
“The resolution today represents another
major step in the Bureau’s efforts
with other state regulators to obtain much
needed relief for investors whose auction
rate securities were frozen and their value
impaired. The continuing efforts by the
Bureau’s Enforcement Chief Richard
Barry have again resulted in a positive
outcome benefiting New Jersey investor victims,”
said Bureau of Securities Deputy Chief Amy
Kopleton.
The investigation into possible
violations by UBS is part of a larger state-led
effort to address problems in connection
with the offer and sale of ARS securities.
Earlier this year, state offices began receiving
hundreds of complaints from Main Street
investors. As a result, in April, NASAA
announced the formation of a multi-state
Task Force, comprised of securities regulators
in 12 states, including New Jersey, to investigate
whether the nation’s prominent Wall
Street firms had systematically misled investors
when placing them in ARS securities.
The members of the Task
Force and the New Jersey BOS are continuing
their investigations into possible misconduct
by other firms.
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