Cuomo: Brokerages May Be Punished for Auction Sales
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Fidelity Investments, Charles Schwab Corp., and Oppenheimer Inc. may be punished for their sales of auction-rate securities, Attorney General Cuomo said, as he laid out his argument for pursuing brokerages that he says deceived investors.
“It seems highly unlikely that the firms had no understanding of what was happening in the ARS market,” Mr. Cuomo’s deputy counselor, Benjamin Lawsky, wrote in a letter yesterday to the Regional Bond Dealers Association. If the brokerages “continued to actively market these products to unknowing investors, that will certainly be relevant to our calculus of the firms’ culpability.”
The attorney general and federal and state regulators have already wrung agreements from five Wall Street banks, including Citigroup Inc. and UBS AG, to repurchase about $35 billion of auction-rate securities. The regional bond dealers group last week told regulators that the banks — not brokers — should be required to buy back the securities they created.
Mr. Cuomo said he has subpoenaed Fidelity, Schwab, Oppenheimer, TD Ameritrade Holding Corp. and E*Trade Financial Corp. The regulators are examining how the securities were marketed before February, when firms overseeing periodic auctions for the debt abandoned their routine role as buyers of last resort, saddling investors with holdings they couldn’t sell.
