Brokerage firms
must reimburse Michigan investors, pay
state $3.5 million
FOR
IMMEDIATE RELEASE
July 1, 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 Merrill Lynch and
Banc of America (BOA) regarding Auction Rate Securities (ARS). The settlement
requires Merrill and BOA to offer full buybacks to any eligible customer who
purchased an ARS from the brokerage firms, including up to $670 million from
Merrill and up to $122 million from BOA. The settlement also requires Merrill
and BOA to make a settlement payments of $3.09 million and $468,000,
respectively, of which 90 percent will be deposited immediately in the State of Michigan’s general fund, as required by law, and the remaining
ten percent will go to OFIR’s Michigan Investor Protection
Trust.
The
settlement with Merrill and BOA is in addition to OFIR’s previous ARS
settlements with Citigroup, Comerica and Wachovia. In total, OFIR settlements
have resulted in offers for full buybacks of more than $3 billion to Michigan consumers and settlement payments of more than $6
million to the State of Michigan.
“In
addition to providing $800 million to Michigan investors, this settlement puts $3 million in the
general fund,” OFIR Commissioner Ken Ross said.
The
settlement resolves a multi-state investigation into allegations that Merrill
and BOA misled investors regarding the liquidity risks associated with investing
into ARS. The investigation alleged that the firms 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.
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