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NEWARK
– The New Jersey Bureau of Securities,
within the Division of Consumer Affairs,
has signed a final Consent Order requiring
Credit Suisse Securities (USA) LLC (“Credit
Suisse”) to repurchase auction-rate
securities (ARS) from New Jersey clients
to settle allegations that Credit Suisse
sold ARS without disclosing known risks
of the ARS market.
Although
marketed and sold to investors as safe,
liquid, and cash-like investments, 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.
Credit
Suisse sold approximately $275.6 million
in ARS to retail and institutional investors
in New Jersey during the time period covered
by the settlement. As part of its findings,
the Bureau determined that Credit Suisse
failed to reasonably supervise its agents.
Credit Suisse will pay $1,057,996 in civil
penalties to the State under terms of the
Consent Order.
"Financial
firms must inform potential investors of
all known risks before investors decide
where to put their hard-earned dollars.
When such disclosure does not occur, investors
can suffer harm that they did not bargain
for," Attorney General Paula T. Dow
said. "We've acted in this matter to
make investors whole and to ensure proper
disclosure occurs going forward."
This
Consent Order represents the 13th settlement
that the Bureau of Securities has reached
with firms that sold ARS to New Jersey investors.
To date, more than $3 billion of these assets
have been repurchased or offered to be repurchased
from New Jersey investors as part of settlements
with firms that marketed and sold these
products.
“Investors
were shocked to find they could not get
their funds when the ARS markets froze.
Concealing or not revealing the risks in
any investment offered to consumers violates
state law, and our Bureau of Securities
will act to protect investors when such
violations occur,” said Thomas R.
Calcagni, Director of the State Division
of Consumer Affairs.
The
investigation into Credit Suisse’s
role in the sale of these 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 certain Wall Street firms had systematically
misled investors when placing them in auction
rate securities.
“State
securities regulators are on the front lines
in protecting investors from illegal activities
that can cost them their savings,”
said Abbe R. Tiger, Securities Bureau Chief.
“This ARS settlement and the others
achieved earlier highlight how state securities
regulators work together to hold violators
accountable when investor protection laws
are not followed.”
Bureau
of Securities Investigating Attorney Peter
C. Cole led New Jersey’s efforts in
securing these settlements and protecting
Garden State investors.
The
Bureau of Securities can be contacted toll-free
within New Jersey at 1-866-I-INVEST
(1-866-446-8378) or from outside New Jersey
at 973-504-3600. The Bureau's
website is located at www.njsecurities.gov
.
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