(Bloomberg) — Charles Schwab Corp. and New York agreed to settle a 2009 lawsuit in which the state accused the firm of promoting auction-rate securities as safe while failing to disclose the risks before the market for them froze.
New York claimed Schwab engaged in "fraudulent and deceptive conduct" in promoting the investments. Auction-rate securities are municipal bonds, corporate bonds and preferred stocks whose rates of return are periodically reset through auctions. Andrew Cuomo, then attorney general, brought the suit.
The settlement was disclosed in a filing in state Supreme Court in Manhattan. No terms were provided. Schwab and New York said in a November filing that they were in talks to end the case.
The $330 billion worldwide market for auction-rate securities collapsed during the 2008 credit crunch as potential buyers vanished. The crisis sparked regulatory investigations and lawsuits alleging that underwriters and brokers had falsely promoted the securities as safe, cash-like investments.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
- Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
- Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
