Attorney General Cuomo Announces The Release Of An Assurance Of Discontinuance In Auction Rate Securities Settlement With Wachovia

NEW YORK, NY (February 5, 2009) - Attorney General Andrew M. Cuomo today announced an Assurance of Discontinue with Wachovia Securities, LLC and Wachovia Capital Markets, LLC (collectively, “Wachovia“”) relating to the auction rate securities settlement reached late last summer. The Assurance details how liquidity will be provided to consumers who purchased auction-rate securities. The Assurance of Discontinuance is the next step in the agreement reached in August with Wachovia.

Attorney General Cuomo in August of last year settled allegations that Wachovia made misrepresentations in their marketing and sale of auction rate securities. As a result of this settlement and those with other regulators Wachovia has begun to return over $8.5 billion to investors across New York State and the nation.

In fact, Wachovia has already purchased more than $4.2 billion or more than 90% of auction rate securities held by individual investors pursuant to the settlement. In addition, Wachovia has purchased an additional $1.5 billion of municipal auction rate securities from both individual and institutional investors.

From the beginning of his investigation into the auction-rate market, the Attorney General’s objective has been to bring relief to investors stuck with illiquid auction-rate securities. To date regulatory settlements have been provided for over $61 billion in investor buy-backs, representing the largest return on behalf of investors ever.

“From day one our mission has been to get investors their money back,” said Attorney General Cuomo. “Working with other regulators, we have been able to obtain relief for tens of thousands of investors who hold tens of billions of dollars’ worth of illiquid auction-rate securities. In an era of bailouts at the expense of taxpayers, the auction rate securities settlements represent an important area where regulators put consumers first. Protecting investor interests is vital to restoring investor confidence in this financial crisis.”

In February 2008, the auction rate securities market seized up as firms allowed auctions to fail, leaving hundreds of thousands of investors holding illiquid investments, despite having been told that their investments were cash equivalents. Attorney General Cuomo opened an investigation shortly thereafter. On August 15, 2008, the Attorney General reached an agreement with Wachovia to settle allegations that the firm misled investors.

Wachovia has agreed to buy back auction-rate securities from certain customers, as set forth in greater detail in the settlement agreement. Investors either already have received or will be receiving correspondence from Wachovia regarding the settlements. Investors should take note that they need to provide appropriate notice to Wachovia in order to participate in this settlement, and could lose their rights to sell their auction rate securities if they fail to do so.

The Attorney General thanked the North American Securities Administrators Association (NASAA), the NASAA multi-state ARS Task Force, the Missouri Securities Commission, and the Financial Industry Regulatory Authority (FINRA), for their efforts in achieving these settlements. In addition, the Attorney General thanked the Securities and Exchange Commission and its staff for their assistance and cooperation in the auction-rate securities investigations.

Assistant Attorneys General Vicki Andreadis, Thomas Teige Carroll, Peter Dean, Pamela Lynam Mahon, Armen Morian, Christopher Mulvihill, Daniel Sangeap, Alisha C. Smith, and Ethan Zlotchew, conducted these investigations along with Kitty Kay Chan, Economist for the Division of Economic Justice, all under the supervision of David A. Markowitz, Chief of the Investor Protection Bureau, and Eric Corngold, Executive Deputy Attorney General for Economic Justice.

Cuomo’s auction-rate securities investigation continues as to other market participants.


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