Morgan, JPMorgan To Buy Back $7B in Securities, Pay Fines
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Morgan Stanley and JPMorgan Chase & Co. agreed to buy back more than $7 billion in auction-rate securities and pay fines totaling $60 million, broadening Wall Street’s settlement of claims the debt was fraudulently sold.
The two banks, among the largest underwriters of auction-rate securities, agreed to buy back the debt from individuals, charities, and small businesses over the next five months, according to Attorney General Cuomo, who led settlement talks. The New York-based banks also agreed to find “liquidity solutions” for institutional clients that bought the securities, Mr. Cuomo said.
“I believe we’ve crossed the Rubicon and established the premise: the investors will be helped,” Mr. Cuomo said at a press conference in New York announcing the settlements.
The agreements bring to four the number of banks that have settled a nationwide investigation of how auction-rate securities were marketed before the $330 billion market collapsed in February. Investors purchased the long-term debt on the advice of brokers who pitched it as a cash equivalent, regulators said, only to find they couldn’t sell the bonds as demand dried up.
UBS AG and Citigroup Inc. last week agreed to redeem about $26 billion of the securities and pay fines of a combined $250 million. Merrill Lynch & Co. also voluntarily offered to repurchase about $10 billion of the securities last week, and is still in talks with regulators, according to the secretary of state of Massachusetts, William Galvin.
