State Securities Regulators Announce Settlement with TD Ameritrade in Auction Rate Securities Investigations
WASHINGTON, D.C. July 20, 2009 — The North American Securities Administrators Association (NASAA) today announced that a settlement in principle has been reached between online brokerage TD Ameritrade, Inc. and state securities regulators to return approximately $456 million to the firm’s clients who have had their funds frozen in the auction rate securities (ARS) market.
The settlement is the result of an investigation of the firm led by the Pennsylvania Securities Commission into allegations that the firm misled clients by falsely assuring them that ARS securities were a safe, liquid alternative to cash, certificates of deposit or money market funds. The ARS markets froze in February 2008, triggering complaints from investors who could not withdraw money from their accounts.
The settlement requires the Omaha, Nebraska, firm to extend offers to repurchase ARS from its retail customers nationwide immediately.
“Today’s settlement will provide much needed relief to investors who have suffered from the collapse of the auction rate securities markets,” said NASAA President and Colorado Securities Commissioner Fred Joseph.
“Because we are closest to the investing public, state securities regulators are often first to identify and bring enforcement actions to halt and remedy a wide variety of investment related violations,” Joseph said. “State securities regulators have secured settlements calling for firms to buy back more than $60 billion of auction rate securities. These settlements are the most recent examples of how states initiate a collaborative approach to a national problem.”
Joseph commended the Pennsylvania Securities Commission and noted the work of the Commission’s Division of Enforcement, Litigation and Compliance. “This settlement is the result both of efficient and effective enforcement work by the Pennsylvania Securities Commission and a willingness by TD Ameritrade to appropriately address the needs of its clients,” he said.
NASAA President Joseph also thanked the New York Office of the Attorney General and the U.S. Securities and Exchange Commission for its collaboration and assistance in reaching today’s settlement.
Under the terms of the settlement, TD Ameritrade agreed to buy back at par value by March 23, 2010, all auction rate securities purchased through the firm by individual investors before February 14, 2008. Under terms of the settlement, “individual investors” include all individuals, legal entities forming an investment vehicle for family members, charities and non-profits, and small- to medium-sized businesses with up to $10 million in accounts with TD Ameritrade.
The settlement agreement also calls for TD Ameritrade to fully reimburse eligible individual investors who sold their auction rate securities at a discount after the market failed and to consent to a special, public arbitration procedure to resolve claims of consequential damages suffered by individual investors as a result of not being able to access their funds.
The investigation into possible violations by TD Ameritrade is part of a larger, ongoing state-led effort to address problems in connection with the offer and sale of ARS securities. In 2008, state securities regulators began receiving hundreds of complaints from Main Street investors. As a result, in April 2008, NASAA announced the formation of a multi-state Task Force, comprised of securities regulators in 12 states, to investigate whether the nation’s prominent Wall Street firms had systematically misled investors when placing them in ARS securities.
NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico.
For more information:
Bob Webster, Director of Communications
Rex Staples, NASAA General Counsel