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Auction-Rate Brokers Likely Knew of Market Weakness, Cuomo Says

August 20, 2008

By David Scheer

Aug. 20 (Bloomberg) -- Regional brokerages that sold auction-rate securities probably knew the market was weakening before it collapsed in February and may be held accountable, New York State Attorney General Andrew Cuomo's Office wrote in a letter to a group representing the firms.

"It seems highly unlikely that the firms had no understanding of what was happening in the ARS market," Benjamin Lawsky, deputy counselor to Cuomo, wrote today to the Regional Bond Dealers Association. "Our investigation will determine the facts and will assess the appropriate level of culpability for these firms in light of what the evidence reveals."

Cuomo shares the group's concern in "providing relief to investors who were defrauded," Lawsky wrote. "With that in mind, you member firms should consider liquidating the ARS investments of their clients, especially those clients who were marketed and sold these instruments by your firms."

To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.

 

 

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