Georgia Fines Investment Banks $8.5M for ARS

BRADENTON, Fla. - Georgia Secretary of State Karen Handel announced Thursday that investment banks will pay the state $8.5 million in fines in conjunction with auction-rate securities sold to individual, business, and institutional investors.

Under agreements resulting in the fines, which will be deposited into the state's general fund, the firms also will repurchase billions of dollars of the securities from customers, Handel said in a release.

Georgia last week received fines of $1.71 million from Wachovia Securities LLC and Citi, and others are yet to come, she said.

The "settlements and fines demonstrate that the state of Georgia is going to protect our citizens, and firms that engage in improper behavior will face serious consequences," Handel said. "Most importantly, hundreds of Georgia consumers will recover their investments."

Handel also commended Georgia Securities Division director Bob Terry, who co-chaired a task force formed in spring 2008 by the North American Securities Administrators Association.

The task force was comprised of securities regulators in 12 states who investigated whether investment firms misled investors when recommending that they purchase auction-rate securities.

As a result of the task force's efforts, a number of firms agreed to repurchase more than $50 billion of illiquid ARS and pay more than $400 million in fines.

It is estimated that more than $3.2 billion of the securities were sold to Georgia investors, a substantial portion of which the firms have agreed to repurchase, according to Handel.

In addition to the Wachovia and Citi, other companies involved in settlements include Bank of America, Deutsche Bank, Credit Suisse Securities, Goldman, Sachs & Co., JPMorgan, Merrill Lynch & Co, Morgan Stanley, RBC Capital Markets, and UBS AG.

"The Georgia Securities Division, along with other states, will continue to investigate firms who are not part of these initial settlements," Handel said.

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