Auction Rate Securities

Nuveen Investments, LLC, has been fined $3 million by the Financial Industry Regulatory Authority (FINRA) for creating misleading marketing materials used in sales of auction rate preferred securities (ARPS). 

A federal district court has dismissed claims brought by an investor in auction rate securities ("ARS") against a financial service firm and its two wholly-owned subsidiaries that underwrote, marketed and sold the securities and managed the auctions at which the interest rates they paid were set.

Yesterday’s highlight – the OIG report about the SEC’s Madoff failures – dominated the news, but there was something else that happened yesterday that’s worthy of mention today: The Financial Industry Regulatory Authority (FINRA) announced it had entered into final settlements with three additional firms to settle charges relating to the sale of auction rate securities (ARS) that became illiquid when auctions froze in February 2008.

A federal jury in Brooklyn, New York, found former Credit Suisse broker Eric Butler guilty of conspiracy and securities fraud yesterday, after a three week trial. When sentenced by Senior United States District Judge Jack B. Weinstein, Butler will face a maximum sentence of 45 years’ imprisonment, according to Benton J. Campbell, United States Attorney for the Eastern District of New York.

The State of New York filed a lawsuit today against Charles Schwab & Co., charging the discount brokerage firm with falsely representing auction rate securities as liquid, short term investments without discussing the risks.