State Securities Regulators Announce Settlement with Credit Suisse Securities in Auction Rate Securities Investigation
WASHINGTON, D.C. September 16, 2008 — The North American Securities Administrators Association (NASAA) today announced that a settlement in principle has been reached between Credit Suisse Securities (USA) LLC and state securities regulators, which will provide relief for 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 Securities Division of the North Carolina Department of the Secretary of State into allegations that the firm misled clients by falsely assuring them that ARS securities were as safe and liquid as cash. The ARS markets froze in February this year, triggering complaints from investors who could not withdraw money from their accounts.
“Today’s settlement is another step in the road to recovery for thousands of Main Street investors who have been trapped in the auction rate securities meltdown. State securities regulators will continue to work toward ensuring that investors harmed by auction rate securities are provided relief,” said NASAA President and North Dakota Securities Commissioner Karen Tyler.
“I am pleased that we produced an outcome that can help ease the hardships that many of these investors faced after losing access to their money,” said Elaine Marshall, the North Carolina Secretary of State and Securities Administrator. “This settlement is the result both of efficient and effective enforcement work by state securities regulators and a willingness by Credit Suisse to arrive at a solution that addresses the needs of its clients.”
NASAA President Tyler thanked the New York Office of the Attorney General for its collaboration and assistance in reaching today’s settlement.
Under the terms of the settlement, Credit Suisse agreed to buy back at par value by December 11, 2008 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 Credit Suisse.
The settlement agreement also calls for Credit Suisse to:
- Fully reimburse all individual investors who sold their auction rate securities at a discount after the market failed;
- 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;
- Undertake to expeditiously provide liquidity solutions to all institutional investors; and
- Pay to the states civil penalties of $15 million.
In consideration of the settlement, the states will agree to terminate their investigation of Credit Suisse’s marketing and sale of auction rate securities to individual investors.
The investigation into possible violations by Credit Suisse is part of a larger, ongoing 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, 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