Settlements, in principle, have been reached between a state auction-rate securities task force, on one hand, and Merrill Lynch, Goldman Sachs and Deutsche Bank, on the other, which would require these investment banks to buy back approximately $12.5 billion in auction-rate securities. In addition, the firms would pay $162.5 million in fines.
The settlement calls for Merrill Lynch to buy back, by October 1, 2008, auction-rate securities purchased through the firm by retail customers with accounts of $4 million or less in assets. Merrill Lynch will buy back by January 2, 2009 the auction-rate securities purchased through the firm for all other retail customers and all other investors with accounts of $100 million or less in assets. Goldman Sachs, under the settlement, has agreed to buy back all auction-rate securities by November 12,2008, from all retail investors who purchased the securities through the firm. Deutsche Bank has agreed to buy back all auction-rate securities from all retail investors who purchased the securities through the firm within the next 90 days.
Each of the firms have also agreed to reimburse retail customers for losses sustained if they sold auction-rate securities and to participate in a special arbitration proceeding with retail customers who claim to have suffered consequential damages. The firms will also undertake to assist institutional investors find liquidity solutions.
The fines to be paid are: Merrill Lynch, $125 million; Goldman Sachs, $22.5 million; and Deutsche Bank, $12.5 million.
The precise terms of the settlements won’t be known until formal agreements are signed. Among other issues, it is unclear exactly how the firms are defining “retail investors”. Investors affected by these settlements should carefully analyze the final agreements.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing individual and institutional investors regarding their auction-rate securities problems. For further information, please contact us.