Credit Suisse Must Pay $400 Million In FINRA Claim Over Auction-Rate Securities

It is big win for institutional investors trapped in auction-rate securities (ARS). Earlier today, the Financial Industry Regulatory Authority (FINRA) announced that Credit Suisse Group must pay STMicroelectronics NV more than $400 million to resolve claims that it misled the semiconductor maker into buying auction-rate securities.

The award is the biggest to date for investors not covered by last year’s ARS settlements, which concentrated solely on retail investors and small businesses. More importantly, the award backs up claims by institutional investors that they, too, were misled about the risks of auction-rate securities.

As reported Feb. 13 by Bloomberg, Credit Suisse Securities will pay $400 million in damages and more than $6.5 million in fees as part of FINRA’s latest decision involving auction-rate securities.  

Since February 2008, when the market for auction-rate securities collapsed, both individual and institutional investors have faced a financial nightmare. Overnight, the supposed cash-like instruments became illiquid investments no one wanted to buy.

In the case of STMicroelectronics, the semiconductor maker said that it initially instructed brokers at Credit Suisse to invest in top-rated securities backed by student loans. Instead, STMicroelectronics says the company invested its cash in unauthorized and unsuitable investments, including toxic and highly risky collateralized debt obligations (CDOs).

STMicroelectronics also believed that Credit Suisse was aware that its brokers were moving clients’ accounts into risky auction-rate securities as part of a scheme to get the securities out of its own inventory and earn higher fees for its services.

FINRA’s Feb. 13 decision would appear to agree. If you are a victim of auction-rate securities fraud, now is the time to act. Call us today.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

This entry was posted on Friday, February 13th, 2009 at 5:04 pmand is filed under ABS & CDOs, Auction Rate Securities. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.