The SEC has filed civil charges against two former Credit Suisse brokers for fraudulently selling auction-rate securities to foreign corporate customers. Among other things, the SEC accused the brokers of telling customers that the auction-rate securities which they were selling were safe and liquid alternatives to bank deposits or money market funds and were backed by insured student loans. In reality, the auction-rate securities sold to those customers were issued by structured finance vehicles backed by subprime mortgages, collateralized debt obligations and other risky collateral. The brokers allegedly sold more than $1 billion of these auction-rate securities to clients in an effort to generate higher commissions.
According to the SEC’s complaint, the brokers went so far as to alter email confirmations to their customers. The brokers allegedly added language to the confirmations to suggest to customers that they were buying auction-rate securities that were federally guaranteed student loans. Similarly, the brokers allegedly deleted references on the confirmations to “CDO” or “Mortgage” in order to conceal the fact that the securities being sold to the customers were backed by mortgages and CDOs.
The SEC is seeking injunctive relief against the brokers together with disgorgement of any ill-gotten gains and civil money penalties. The case is pending in the United States District Court in Manhattan.
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 institutional and corporate investors in auction-rate securities cases. For further information, please contact us.