Securities Law Blog

The North American Securities Administrators Association (NASAA) ( http://www.nasaa.org ) recently announced that several of its members have been conducting investigations involving auction-rate securities (ARS) and are coordinating their efforts to help investors who cannot access funds that their brokers placed in these complex investment products. NASAA President Karen Tyler said that state securities regulators have been responding to auction-rate securities-related complaints and have had investigations underway since late February. The investigations, which focus on broker sales practices and supervisory issues related to auction-rate securities, are being conducted by individual jurisdictions through a NASAA ARS Task Force. Bryan Lantagne, director of the Massachusetts Securities Division, chairs the task force, whose members include state securities regulators from Florida, Georgia, Illinois, Massachusetts, Missouri, New Hampshire, New Jersey, Texas and Washington. “Given the number and nature of the complaints and the damaging impact this latest manifestation of the credit crisis is having on Main Street investors, state securities regulators have structured a coordinated approach to moving forward with our investigations,” said Tyler, who is North Dakota’s securities commissioner. If regulators find violations, they will seek appropriate remedies, including a “much stronger commitment from Wall Street to provide their retail clients with an acceptable solution,” according to Tyler. “Our focus is to determine what conduct took place at the point of sale – what was potentially misrepresented and omitted – and our goal is securing for investors access to their cash as requested,” Tyler said. “If the product was represented to be a cash equivalent going in, it must be treated as a cash equivalent coming out.” According to Task Force Chair Lantagne, investors have reported to state securities regulators that they were unaware that their money was invested in auction-rate securities or were not advised about the liquidity risks of these instruments. “Based on these investor complaints, this appears to be a pervasive problem,” Lantagne added.

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.