State Gets $2 Million in Multi-State Securities Settlement

NASHVILLE, TN. - Department of Commerce and Insurance (TDCI) Commissioner Leslie A. Newman is announcing settlements of more than $2 million between the Securities Division and two investment companies, tied to their sales of auction-rate securities to Tennesseans.

When the auction-rate securities markets froze in 2008, investors throughout the country were left holding securities that they could not sell at auction. The Tennessee settlement is part of a multi-state agreement in which Wachovia Securities LLC and Wachovia Capital Markets LLC have agreed to pay a $50 million penalty split among the states and to buy back more than $8.5 billion in auction rate securities nationwide. Citigroup Global Markets Inc. agreed to pay a $50 million fine to the states, as well as repurchase about $7 billion in auction rate securities nationwide. The Securities Division is relaying Tennessee's portion of the penalty - more than $1.6 million from Citigroup and more than $444,000 from Wachovia - to the State's General Fund.

"The repurchase of auction-rate securities provides investors with relief from having been stuck in a frozen market," says Newman. "During an economic downturn, investment liquidity is even more critical to investors. We are happy to have participated in the national effort to make investors whole."

The settlements stem from an investigation initiated by a multi-state task force of state regulators formed by the North American Securities Administrators Association (NASAA), of which Tennessee is a participating member. NASAA and the Securities and Exchange Commission's investigation alleged that misrepresentations were made by Wachovia and Citigroup to thousands of their customers about the liquidity risk associated with auction-rate securities. When the markets froze, promises that had been made were not honored.

The companies should have already contacted Tennessee investors to buy back their auction-rate securities. Tennessee investors who have not heard from companies that sold them auction-rate securities should contact the Securities Division at 615-741-2947 or 800-863-9117.

The Department of Commerce and Insurance works to protect consumers while ensuring fair competition for industries and professionals who do business in Tennessee.