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The Office of the Attorney General
through its Bureau of Securities has
signed a final Consent Order that
requires RBC Capital Markets Corp.
to complete or confirm its
repurchase of auction-rate
securities (ARS) from New Jersey
clients to settle allegations that
the firm’s securities dealers sold
ARS without disclosing known risks
of the ARS market.
Under the terms of the settlement,
RBC will repurchase all of the ARS,
approximately $51 million, that it
sold to New Jersey investors.
Although marketed and sold to
investors as safe, liquid, and
cash-like investments, the 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.
“The Bureau of Securities has sought
to secure much needed relief for
investors stuck with these
unsuitable and illiquid products,”
said Marc B. Minor, New Jersey
Bureau of Securities chief. “State
securities regulators joined forces
to resolve this matter on behalf of
New Jersey investors and we continue
to be on the frontlines in
protecting investors and their
hard-earned savings.”
The order also requires RBC to pay a
$51,724 civil penalty to New Jersey.
This amount represents the state’s
pro-rata share of a settlement
negotiated by a multi-state task
force of state regulators formed by
the North American Securities
Administrators Association (NASAA).
During the investigation, regulators
discovered that RBC’s securities
dealers failed to adequately inform
customers on the risks associated
with buying auction-rate securities.
The investigation into RBC’s role in
the marketing of auction rate
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,
in April, 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.
The Consent Order sets forth the
allegations by the BOS and the terms
that were agreed to in principle in
October, 2008.
BOS Investigating Attorney Peter C.
Cole led New Jersey’s efforts in
securing this settlement and
protecting Garden State investors.
The Bureau of Securities can be
contacted toll-free within New
Jersey at 1-877-I-INVEST
(1-877-446-8378) or from
outside New Jersey at
973-504-3600. The Bureau's
web site is located at
www.njsecurities.gov. |