Morgan Stanley Offers To Buy Back Auction Rate Securities
Morgan Stanley is now the latest Wall Street firm to try and cut a deal in the auction rate securities investigation. Late Monday evening, the nation’s second-biggest U.S. securities firm offered to buy back up to $4.5 billion worth of the securities from retail investors, reaching its decision only hours after New York Attorney General Andrew Cuomo sent a letter to Morgan Stanley, Wachovia and JP Morgan Chase that demanded the firms begin negotiations over their sales of auction rate securities.
As part of its offer, beginning Sept. 30 Morgan Stanley would repurchase auction rate securities for up to 30 days from individuals, charities and businesses. It also would make whole those investors who bought the securities before Feb. 12 and then were forced to sell them for a loss.
However, a spokesman for Cuomo said in a statement that the Morgan Stanley’s offer came “too little, too late,†and that the New York attorney general would continue his investigation, according to an Aug. 11 article in the New York Times.
As of last week, settlements had been reached between Cuomo’s office and Citigroup, UBS, and Merrill Lynch. On Aug. 7, Citigroup agreed to repurchase about $7.3 billion of the securities and pay a fine of $100 million. UBS is paying a $150 million fine and buying back $18.6 billion. Merrill Lynch announced its own auction rate buy back program on Aug. 8, saying it will repurchase some $10 billion in the securities.
Separately, on Aug. 8, Morgan Stanley agreed to pay $1.5 million to reimburse two Massachusetts cities, New Bedford and Hopkinton, for their auction rate securities investments.
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