Charles Schwab & Co. Sued For Allegedly Fraudulent Sales Of Auction Rate Securities
.jpg)
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. According to New York State Attorney General Andrew Cuomo, these representations “gave investors a false sense of security that their investments would always be liquid when auction rate securities, in fact, faced significant, inherent liquidity risks.”
Auction rate securities are long-term bonds that rely on the successful operation of a periodic auction for short term liquidity. The court complaint alleges that Schwab brokers
“repeatedly and persistently” misrepresented the liquidity risks in auction rate securities, comparing them to money market funds or certificates of deposit, selling auction rates as suitable for cash management purposes, or otherwise telling customers they would always be able to retrieve their cash.
“repeatedly and persistently” misrepresented the liquidity risks in auction rate securities, comparing them to money market funds or certificates of deposit, selling auction rates as suitable for cash management purposes, or otherwise telling customers they would always be able to retrieve their cash.
“Charles Schwab owed its customers a duty to properly understand and make accurate representations concerning auction rate securities,” Cuomo stated, “Today we commenced a lawsuit to remedy Schwab’s repeated breach of that duty. This filing should send a signal that anyone in the industry who misrepresented the risks of investing in auction rate securities will be held accountable.”
Bookmark/Search this post with
