Morgan Stanley & Co. Inc. (MS) and TD Ameritrade Inc. (AMTD) will buy back over $338 million in auction rate securities from New Jersey investors. The repurchase is to settle securities allegations by the state’s attorney general that the financial firms did not adequately disclose the risks involved with investing in ARS.
Per the settlement, Morgan Stanley (the ARS underwriters) will repurchase $322.27 in ARS that it sold to retail investors and pay civil penalties of $1.56 million. The New Jersey Bureau of Securities claims that not only did the financial firm fail to tell investors of the risks involved in the financial instruments—even after knowing the ARS market was in trouble—but Morgan Stanley also failed to adequately train financial advisers and brokers about the possible illiquidity that could impact ARS.
TD Ameritrade (the ARS distributor) will buy back $16.1 million in ARS. The bureau claims that the broker-dealer’s registered representatives failed to inform clients of the risks involving ARS.
In a release issued late last month, Thomas R. Calcagni, Acting Director of the Division of Consumer Affairs, said that efforts have led to financial firms either buying back or offering to repurchase over $2.7 billion in ARS. The settlements with Morgan Stanley and TD Ameritrade are the ninth and tenth ones that the Division has reached with firms that sold ARS to investors. Earlier this year, UBS agreed to buy back $1.5 billion in ARS from New Jersey investors.
Related Web Resources:
Division of Consumer Affairs Announces Settlement: Morgan Stanley and TD Ameritrade Agree to Repurchase Over $338 Million in Auction Rate Securities from N.J. Investors, The State of New Jersey, April 21, 2011
Morgan Stanley Consent Order (PDF)
TD Ameritrade Consent Order (PDF)
More Blog Posts:
Auction-Rate Securities Investigations by SEC and NY Attorney General Are Ongoing, Stockbroker Fraud Blog, April 21, 2011
Anschutz Corp.’s Securities Fraud Lawsuit Against Deutsche Bank and Credit Rating Agencies Over Their Alleged Mishandling of Auction-Rate Securities Can Proceed, Says District Court, Institutional Investor Securities Blog, April 21, 2011
Class Auction-Rate Securities Lawsuit Against Raymond James Financial Survives Dismissal, Stockbroker Fraud Blog, September 27, 2010