CHICAGO — Raymond James & Associates Inc. has agreed to repurchase $31.2 million of auction-rate securities from Indiana investors affected by the failure of the auction-rate market in 2008, Indiana Secretary of State Charles White announced Wednesday.
The agreement is part of a multi-state settlement with the St. Petersburg, Fla.-based firm. Indiana was among several states that joined together to investigate and pursue settlements with various investment firms since the collapse of the auction-rate market in February 2008.
The agreement will settle allegations that Raymond James did not disclose to investors the risks associated with the auction-rate market, presenting the securities as easily convertible to cash when in fact they were actually long-term bonds that can leave the investors unable to sell.
Raymond James said it would repurchase $31.2 million of auction-rate securities from Indiana investors whose funds have been frozen since the market's collapse. It will also pay Indiana a civil penalty of $63,000.
All told, Indiana has settled with more than a dozen investment banks that have agreed to repurchase a total of $804 million of ARS from Indiana investors.
"When there is an opportunity to return money to Indiana investors, it's a win," White said in a statement. "When we're talking about a total of just under a billion dollars returned to Hoosiers, it's a huge win. I can't praise our staff enough for their leadership in making this possible."
In a June 29 press release announcing the multi-state settlement, Raymond James said it neither admits or denies the allegations but that it is pleased to mark the end of a three-year investigation into the ARS market.
The firm added that it did disclose the risk of auction failure in transaction confirmations to investors, but noted that "regulators determined that the nature and risks of ARS were not fully described in some instances."
"I am pleased we are able to resolve this issue and provide liquidity to clients who continue to hold ARS in their portfolios," Raymond James chief executive, Paul Reilly, said in a statement.
The statement said the firm had reduced its client holdings of ARS from $2.1 billion in February 2008 to $280 million as of June 2011.
In April, Indiana's then-Secretary of State Todd Rokita announced the state had reached settlements with 12 firms which together agreed to purchase $370 million: Goldman, Sachs & Co., Banc of America, Citigroup, Credit Suisse, Deutschebank, JPMorgan, Merrill Lynch, Morgan Stanley, RBC, Stifel Nicolaus & Co., UBS and Wachovia.
