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TAG | ARS

Oct/11

25

Colorado Settles E*Trade Auction Rate Securities

Comments off · Posted by Securities Lawyer in FINRA

The following press release was from the State of Colorado regarding a settlement with E*Trade over the firm’s auction rate securities issues.

Colorado Securities Commissioner Announces Settlement of its Auction Rate Securities Enforcement Action against E*TRADE

The Colorado Securities Commissioner Fred Joseph announced today that a settlement in principle has been reached between E*TRADE Securities, LLC, and the Colorado Division of Securities settling its enforcement action against E*TRADE related to its sale of auction rate securities to Colorado investors. Under the settlement agreement, E*TRADE agreed to buy back approximately $3.5 million worth of auction rate securities from Colorado investors who found themselves unable to sell their securities after they had been frozen in the auction rate securities (“ARS”) market. This settlement also includes a broader agreement by E*TRADE to return approximately $100 million to the firm’s clients on a nationwide basis.

This settlement concludes the Division’s enforcement action initiated to sanction E*TRADE’s license in Colorado for alleged violations of the Colorado Securities Act in connection with the sale of auction rate securities to Colorado investors. A hearing was held before Administrative Law Judge Robert Spencer beginning June 6, 2011. On August 12, 2011, Judge Spencer issued his initial decision finding that E*TRADE willfully misrepresented material facts in connection with the sales of auction rate securities to Colorado investors and failed to adequately supervise its financial advisors who sold the auction rate securities to Colorado investors. The Initial Decision by Judge Spencer is not an effective or final order, but was pending with the Securities Commissioner for issuance of a final order.

This settlement also concluded a multi-state investigation of E*TRADE for its role in the sale of auction rate securities for making misleading representations to certain of its clients that auction rate securities were the same as “7 day paper” and were a suitable alternative to money market funds for liquidity purposes. It did so through its sales force, some of whom represented to certain investors that auction rate securities were safe investments for cash management purposes. The auction rate securities markets froze in February of 2008, triggering a flood of complaints from investors who could not withdraw money from their accounts. States 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.
E*TRADE has agreed to make Colorado investors whole,” said Commissioner Joseph. “Getting this relief for investors was our ultimate goal. I credit the hard work and persistence of the Staff of the Division and the lawyers from the Colorado Attorney General’s office who represented us in our action for achieving this positive result for investors.”

These terms of the settlement include E*TRADE’s agreement to buy back at par all outstanding auction rate securities purchased through the firm by individual investors prior to February 11, 2008, fully reimburse all individual investors who sold their auction rate securities at a discount, reimburse certain investors for the cost of loans after the investor took out a loan from E*TRADE because their securities were frozen, and pay a penalty and the costs of the legal action.

The settlement is the fifteenth that the Securities Commissioner has entered. Previous settlements include Deutsche Bank Securities, Citigroup Global Markets, Bank of America Securities, Credit Suisse Securities, JP Morgan Chase, Merrill Lynch, RBC Capital Markets, UBS Securities, Wachovia Securities, Stifel Nicolaus, Goldman Sachs, Morgan Stanley, TD Ameritrade, and Wells Fargo. The Division continues to investigate possible misconduct by other firms.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of auction-rate securities losses through E*Trade Financial Corporation, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Sep/11

15

SunTrust Robinson Humphrey, SunTrust Investment Services Fined a Total of $5 Million by FINRA for Auction Rate Securities Violations

Comments off · Posted by Securities Lawyer in FINRA

WASHINGTON — In an article from FINRA’s website, The Financial Industry Regulatory Authority (FINRA) announced that it has fined SunTrust Robinson Humphrey, Inc. (SunTrust RH) and SunTrust Investment Services, Inc. (SunTrust IS) for violations related to the sale of auction rate securities (ARS). SunTrust RH, which underwrote the ARS, was fined $4.6 million for failing to adequately disclose the increased risk that auctions could fail, sharing material non-public information, using sales material that did not adequately disclose the risks associated with ARS, and having inadequate supervisory procedures and training concerning the sales and marketing of ARS. SunTrust IS was fined $400,000 for having deficient ARS sales material, procedures and training.

 The FINRA article stated that FINRA found beginning in late summer 2007, SunTrust RH became aware of stresses in the ARS market that raised the risk that auctions might fail. At the same time, SunTrust RH was told by its parent, SunTrust Bank, to reduce its use of the bank’s capital and began to examine whether it had the financial capability in the event of a major market disruption to support all ARS in which it acted as the sole or lead broker-dealer. As these stresses increased, the firm failed to adequately disclose the increased risk to its sales representatives while encouraging them to sell SunTrust RH-led ARS issues in order to reduce the firm’s inventory. As a result, certain SunTrust RH sales representatives continued to sell these ARS as safe and liquid. In February 2008, SunTrust RH stopped supporting ARS auctions, knowing that those auctions would fail and the ARS would become illiquid.

Both SunTrust RH and SunTrust IS used advertising and marketing materials that were not fair and balanced, and did not provide a sound basis for evaluating all the facts about purchasing ARS. Specifically, the materials did not contain adequate disclosure of all the risks of ARS, including adequately disclosing the risk that ARS auctions could fail, rendering the investments illiquid for substantial periods of time. Both firms failed to maintain adequate supervisory procedures and training concerning their sales and marketing of ARS.

The FINRA article adds that FINRA found on Feb. 13, 2008, SunTrust RH shared material non-public information regarding the potential refinancing of certain ARS issues with SunTrust Bank, which was contemplating investing in ARS. This information was material because SunTrust Bank was assured that if the auction market froze, it would likely be able to dispose of the illiquid ARS on the date the ARS was refinanced.

 Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “SunTrust Robinson Humphrey and SunTrust Investment Services withheld information about the ARS market which prevented their sales representatives from making proper recommendations and their customers from making informed decisions about ARS. Because of that, the customers were left holding illiquid securities when the auctions failed.”

 FINRA goes on to say that this action concludes the agreements in principle with FINRA that were previously announced in Sept. 2008 and withdrawn in May 2009. SunTrust RH and SunTrust IS voluntarily repurchased approximately $381 million and $262 million of ARS, respectively, from their customers after FINRA began its investigation. In addition, as part of the settlements, the firms will participate in a special FINRA-administered arbitration program for eligible investors to resolve investor claims for consequential damages.

 In concluding these settlements, the firms neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.  This information was obtained from FINRA’s website.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of  SunTrust Robinson Humphrey, SunTrust Investment Services Inc., relating to the sale of auction rate securities (ARS), please call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Sep/11

14

E*Trade Gets Wells Notice For Auction-Rate Securities

Comments off · Posted by Securities Lawyer in FINRA

NEW YORK - In an article from FoxBusiness.com, Brett Philbin writes that  E*Trade Financial Corp. (ETFC)  received a Wells notice from the Financial Industry Regulatory Authority related to the purchase of auction-rate securities by customers of one of its subsidiaries, according to a regulatory filing.  A Wells notice indicates that regulators are recommending enforcement action and gives the company a chance to respond.

Auction-rate securities are long-term debt instruments with attributes of short-term securities because they were resold with new interest rates in periodic auctions. Investors eventually found themselves stuck with the securities after the market froze.

The article states that in its annual report filed with the Securities and Exchange Commission (SEC), the New York online brokerage said its E*Trade Securities, LLC, unit received the notice Feb. 9. E*Trade is the latest online brokerage to face pressure from regulators to make investors whole following the breakdown of the ARS market in 2008.

Philbin writes that last spring, rival TD Ameritrade Holding Corp. (AMTD) agreed to repurchase $305 million in auction-rate securities from clients, while Charles Schwab Corp. (SCHW) received a Wells notice of its own from the SEC as well as a civil complaint from the New York Attorney General in 2009. Schwab filed a motion to dismiss the AG’s case and told Finra it believes the enforcement charges are unwarranted.

 The FoxBusiness article said that in the filing, E*Trade said it is “cooperating with these inquiries and will submit a Wells response to Finra setting forth the bases for E*TRADE Securities’ belief that disciplinary action is not warranted.” The company said the total amount of auction-rate securities held by its customers was $138.2 million as of Dec. 31, 2010.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of  auction-rate securities losses through E*Trade Financial Corporation, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

 

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Jun/11

30

Raymond James Financial Inc. Agrees to Settlement with States, SEC over Auction-Rate Securities; to Pay $1.7M Fine

Comments off · Posted by Securities Lawyer in FINRA

In a June 29, 2011, article by Bruce Kelly for InvestmentNews.com he writes that as part of a settlement with eight states and the Securities and Exchange Commission, Raymond James Financial Inc. will buy back $300 million in auction-rate securities from clients and pay a fine of $1.7 million. The states in charge of the settlement are Florida and Texas. Other states involved were Indiana, Missouri, New York, North Carolina, Pennsylvania and South Carolina.

It was reported that Raymond James has 30 days to extend an offer to repurchase the securities, and the offer must be open for 75 days after that initial bid.

Raymond James’ registered representatives and financial advisers told their customers that ARS were “cash equivalents” and “highly liquid” short-term investments that sported a higher yield than money market accounts, according to the consent order for the dispute.

Kelly goes on to say that Raymond James has been dealing with the ARS mess since the winter of 2008, when the market froze for billions of dollars of the securities, leaving institutional and retail clients locked into large cash positions. In August 2008, Raymond James said it was subject to investigations by regulators regarding the ARS sold be its registered reps to clients, who owned about $1.3 billion in paper at that time. Since then, the firm has been unwinding its position, but the issue of buying back ARS has been a thorn in the side of the brokerage for some time. In March 2009, the firm’s chairman and former chief executive, Tom James, said it was possible that Raymond James could sue an issuer of the securities, Pacific Investment Management Co. LLC, if it failed to buy back the securities from clients.

“These [issuing firms] are going to refinance; otherwise, as I’ve told them, ‘We’re going to sue you guys,’” Mr. James said at the time. “‘You don’t understand. We distributed for you guys, and you haven’t lived up to your obligations.’”

It was reported in the InvestmentNews.com article that Raymond James, which neither admitted to or denied the allegations, noted that it was fined by the states, not the SEC.

“Raymond James leadership worked diligently to facilitate redemptions by the issuers of ARS,” the firm said in a statement. “Client holdings at the firm were reduced from approximately $2.1 billion in February 2008 to $280 million this month.”

“I am pleased we are able to resolve this issue and provide liquidity to clients who continue to hold ARS in their portfolios,” said CEO Paul Reilly.

The $300 million buyback seems a large sum for Raymond James to pay, considering in May the B-D noted that “any action by a regulatory authority to compel us to repurchase the outstanding ARS held by our clients would likely be vigorously contested by us.”

What’s more, rival Morgan Keegan & Co. Inc. yesterday won a major court victory stemming from its sales of ARS. A federal judge in Atlanta on Tuesday rejected SEC claims that the brokerage, a unit of Regions Financial Corp., misled investors about $2.2 billion in ARS. In announcing the summary judgment, U.S. District Court Judge William S. Duffey Jr. said “failure to predict the market does not amount to securities fraud.”

The above information was obtained from InvestmentNews.com.

Attorney Lars Soreide, of Soreide Law Group, PLLC, feels this is good news for many of his clients who have pending FINRA arbitrations against Raymond James Financial. If you or a loved one have purchased auction rate securities from Raymond James call Soreide Law Group, PLLC and speak to a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jun/11

30

RAYMOND JAMES MAKES OFFER TO PURCHASE AUCTION RATE SECURITIES

Comments off · Posted by Securities Lawyer in FINRA

The following information was posted on Raymond James’ website:

Raymond James Offer to purchase eligible auction rate securities

After providing ready liquidity to investors for over 23 years, in mid-February 2008 the Auction Rate Securities (ARS) market reacted to the unprecedented contractions in the credit markets, resulting in widespread auction failures. While some issuers have redeemed significant portions of their outstanding ARS, the market for ARS remains mostly illiquid.

To address this illiquidity for clients, Raymond James is offering to purchase eligible ARS that clients purchased through us.

Raymond James’ offer to purchase outstanding ARS comes after a settlement with the Securities and Exchange Commission and the North American Securities Administrators Association.

Purchase request process

Qualified investors will receive information with terms of and instructions for redemption by mail within 30 days of the public announcement (June 29, 2011). Clients who believe they are eligible and do not receive instructions should contact their financial advisor or Raymond James Client Services at 800-647-7378.

For ARS to be eligible for the purchase offer, the following must be true:

  • The securities must have been purchased from Raymond James on or before February 13, 2008.
  • Clients must have held those securities on February 13, 2008.
  • Clients must currently own the securities or have sold them below par value.
  • The securities must have failed at auction at least once since February 13, 2008.
  • The securities must not have been called or redeemed, or be subject to calls or redemptions as of June 29, 2011.

In accordance with the settlement, Raymond James will continue to consider client inquiries until 12 a.m. September 30, 2011.

Pricing and fees

If clients accept the offer, Raymond James will purchase eligible ARS at par value, which is the face value of the security. They will also receive payment of interest or dividends, if any, at the rate established at the last reset date and will not incur any fees or commissions for transactions related to the purchase of eligible securities.

Other claims

Participating in this offer will not result in a waiver of any claims you may have against Raymond James. Important information on arbitration procedures that have been established to resolve any claims are available.

The above information was posted on Raymond James’ website.

Attorney Lars Soreide, of Soreide Law Group, PLLC, wants you to know that if you or a loved one DO NOT meet this criteria, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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