Broker-dealer Raymond James has agreed to buy back $300 million in auction-rate securities and to pay a $1.7 million fine as part of a settlement with the SEC and eight states: Florida, Texas, Indiana, Missouri, New York, North Carolina, Pennsylvania, and South Carolina ("Raymond James to Pony Up $300M to Buy Back ARS," InvestmentNews, June 29, 2011).
This settlement is only one of many that have been reached over the past few years. Investigations into the auction-rate securities market and the methods of the securities' major underwriters have been underway since February of 2008 when the $330 billion auction-rate securities market crashed. (For more information about the crash, click here.)
Dispute documents state that Raymond James' financial advisers and registered representatives sold auction-rate securities as "highly liquid" "cash equivalents," according to theInvestmentNews article. Unfortunately for investors who purchased the securities, that liquidity was an illusion. In fact, approximately $130 billion worth of investor money remains stuck in the frozen market even today. (For more information, click here.)
Under the terms of the settlement agreement, Raymond James has 30 days to extend an offer to repurchase the $300 million in auction-rate securities.