Bank Of America To Buy Its ARS Back
sponsored by:
Bank
of America joins a growing list of banks and brokerage firms that have promised
to buy back auction-rate securities sold by their brokers. Today, the nation’s second-largest bank
by assets settled an investigation by Massachusetts regulators, agreeing to buy
back $4.5 billion worth of the securities.
The
bank, which neither admitted nor denied any wrongdoing, said the window for the
buyback will open after October 1, and remain that way for three months.
Meanwhile, separate investigations of BoA by the New York Attorney General and
the SEC are ongoing, and the firm says it is cooperating.
Linda
Chatman Thomsen, the SEC’s director of enforcement, issued a statement indicating
that a settlement with BofA is imminent: “The SEC Division of Enforcement
expects to soon announce the terms of a preliminary settlement with Bank of
America that results from our ongoing auction-rate securities
investigations. The SEC investigations have resulted in preliminary
agreements that represent the biggest financial settlements and returns of
customer money in Commission history. We are grateful for the assistance
and close cooperation from state regulators and FINRA in helping us return tens
of billions of dollars to hundreds of thousands of investors even as our
investigations of potential corporate and individual wrongdoing continue.”
Total
buybacks of auction-rate securities by the firms that sold them to clients—including
Merrill Lynch, Goldman Sachs, Deutsche Bank, UBS, Citigroup, Morgan Stanley,
JPMorgan Chase and Wachovia—now total more than $50 billion.
The
move to pay back retail investors will no doubt be welcomed by financial
advisors, who have been embarrassed by the ARS meltdown. And it has hurt them. In
our cover story
in July (“Asset-Gathering Machines”), Registered Rep. magazine notes that
registered investment advisors—independent fiduciaries—are stealing wirehouse
retail assets. Our September cover story (“Whole Lotta Love”) notes that
wirehouse management has been sweetening
some perks to its best financial advisors to keep them from going independent
or joining (or creating) RIAs.
