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Misled Indiana investors to recover more than $370 million due to state’s auction rate securities settlements with national securities firms Misled Indiana investors to recover more than $370 million due to state’s auction rate securities settlements with national securities firms

Firms also agree to pay over $3.5 million in fines; Final settlement reached today with Goldman Sachs

INDIANAPOLIS – Indiana Secretary of State Todd Rokita announced today that his Indiana Securities Division finalized the last of a dozen settlements with major national securities firms to settle allegations that the firms misled investors about the safety of the auction rate securities market. The 12 major investment firms have agreed to repurchase auction rate securities from Indiana clients totaling more than $370 million and pay fines of more than $3.5 million. This afternoon, Indiana Securities Commissioner Chris Naylor signed the last agreement, a settlement with Goldman, Sachs & Co. that includes a $284,818 fine.

“Soon after the failure of these auctions, my Indiana Securities Division immediately began to seek much needed relief for investors stuck with auction rate securities,” said Secretary Rokita. “I am pleased that these firms have owned up to their responsibility and agreed to do what’s right by buying back the bad investments they sold Hoosier investors.”

Two million dollars of the $3.5 million in fines will help fund the newly created Securities Restitution Fund, a program that will help victims of investment fraud in Indiana recover some of their losses. Additional fines will be used by the Securities Division in continuing efforts to combat white collar crimes such as investment and mortgage fraud and to bolster the Division’s ability to lend expert resources and investigative support to county prosecutors and police agencies.

Although marketed and sold to investors as safe, liquid and cash-like investments, auction rate securities are actually long-term investments subject to a complex auction process that failed in early 2008, leaving investors without a market to sell their securities and without access to the money they invested.

“We are holding these companies accountable for the unethical behavior of selling auction rate securities to Indiana investors without fully disclosing the risks involved,” said Secretary Rokita. “This action sends a strong message that states will not tolerate such unethical and unlawful activity.”

The national securities firms agreed to pay fines to the State of Indiana in the following amounts:

Banc of America    $121,627.68
Citigroup               $315,520.90
Credit Suisse         $38,765.10
Deutschebank        $36,504.51
Goldman Sachs      $284,818.71
JP Morgan             $245,418.15
Merrill Lynch         $900,208.25
Morgan Stanley     $172,267.80
RBC                      $38,666.77
Stifel Nicolaus        $173,323.36
UBS                      $705,000.11
Wachovia              $509,628.73

In 2008, state securities regulators across the country began receiving complaints from investors and formed a multi-state task force to investigate whether the nation's prominent Wall Street firms had systematically misled investors when marketing auction rate securities. In particular, the Indiana Securities Division took a leadership role in the investigation into securities violations by Stifel, Nicolaus and Company, resulting in a multi-state settlement in December, 2009 and the return of more than $55 million to Hoosier investors.  

Click for settlement agreement with Goldman, Sachs & Co.

Media Contact: Jim Gavin, 317.233.8655,