SunTrust Settles Auction Rate Securities Case with Regulators


Two subsidiaries of SunTrust Banks, SunTrust Robinson-Humphrey and SunTrust Investment Services have agreed to pay a combined total of $5 million to settle FINRA charges that they misled clients about the liquidity risks of auction rate securities, according to an article in the Atlanta Journal by J. Scott Trubey entitled “Regulator fines two units of SunTrust.”

SunTrust Robinson-Humphrey will pay $4.6 million for using misleading sales materials that failed to disclose material risks, as well as for inadequate supervisory procedures and training of its representatives who sold the auction rate securities. In addition, FINRA fined the company for disclosing nonpublic information to its Atlanta-based parent company.

Similarly, SunTrust Investment Services will pay $400,000 for inadequate training, sales materials and procedures related to its sales of auction rate securities.
Auction rate securities are essentially a type of long-term debt largely issued by governments and large corporations, with yields on that debt reset periodically. Many firms misleadingly marketed auction rate securities as cash equivalent investments. However, the market for these securities froze during the financial crisis. Many brokers of auction rate securities have been buying them back under settlements with regulators.

Following the start of FINRA’s investigation, SunTrust Robinson-Humphrey and SunTrust Investment Services agreed to repurchase about $381 million and $262 million of auction rate securities, respectively, from clients. The firms have also agreed to participate in a FINRA-run arbitration program to resolve possible claims for damages by eligible investors.

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 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in cases involving auction rate securities. For further information, please contact us.