Brokerage firm must reimburse Michigan investors, pay state over $600,000

FOR IMMEDIATE RELEASE 
October 8, 2009
Contact: Jason Moon  517-335-1700

LANSING – The Office of Financial and Insurance Regulation (OFIR) today announced that it has reached a settlement with JPMorgan Chase regarding Auction Rate Securities (ARS). The settlement requires JPMorgan to offer full buybacks of up to $480 million to any eligible customer who purchased an ARS from the brokerage firm. The settlement also required JPMorgan to make a settlement payment of $664,429, of which 90 percent was deposited immediately in the State of Michigan’s general fund, as required by law, and the remaining ten percent was placed into OFIR’s Michigan Investor Protection Trust.

The settlement with JPMorgan is in addition to OFIR’s previous ARS settlements with Banc of America, Citigroup, Comerica, Merrill Lynch and Wachovia. In total, OFIR settlements have resulted in offers for full buybacks of more than $3.5 billion to Michigan consumers and settlement payments of more than $6.5 million to the State of Michigan.

“In addition to providing $480 million to Michigan investors, this settlement puts nearly $600,000 in the general fund,” OFIR Commissioner Ken Ross said.  

The settlement resolves a multi-state investigation into allegations that JPMorgan misled investors regarding the liquidity risks associated with investing into ARS. The investigation alleged that the firm misled investors by representing ARS as a safe and secure investment option to buyers and were said to have the same liquidity as cash. When the market for ARS collapsed last year, investors were stunned to learn their accounts were frozen and they no longer had access to their money. The direct result for many investors was that their money was no longer available to support ongoing business operations.

The Michigan Investor Protection Trust is funded entirely by securities settlements and is used to educate Michigan consumers on investment issues and how to avoid financial scams. OFIR has used these funds to expand the “Investor Education in Your Community” program that educates Michigan investors on how to avoid falling victim to investment fraud. The fund is also used to support OFIR’s investment scams training for local law enforcement and aid the agency’s “Free Lunch Seminar Monitor” program that gives individuals an opportunity to fight back against unscrupulous promoters by reporting questionable investment practices to OFIR. 

If Michigan investors have any questions about an investment firm, professional or product, please contact OFIR toll-free at (877) 999-6442 or online at www.michigan.gov/ofir.