Wachovia Joins Auction-Rate Securities Settlement Parade


Today the Securities & Exchange Commission and an auction-rate securities task force composed of various state regulators announced that they had entered into a tentative settlement with Wachovia which would require Wachovia to buy-back approximately $9 billion of auction-rate securities. This settlement is closely patterned after an earlier settlement entered into with UBS regarding its sale of auction-rate securities.

Under the tentative terms of the settlement, Wachovia would repurchase, for face value, approximately $5.7 billion of auction-rate securities sold to individuals, charitable organizations and small businesses. Wachovia would also agree to reimburse these categories of investors for any losses which they incurred when they sold their auction-rate securities. These repurchases and reimbursements are to occur between November 10, 2008 and November 28, 2008. In addition, between June 10, 2009 and June 30, 2009 Wachovia would repurchase, at par, approximately $3.1 billion of auction-rate securities sold to institutions and larger customers. Wachovia would also enter into an agreement to engage in a special arbitration process to resolve any claims of investors who have sustained unusual (consequential) damages. As part of the settlement, Wachovia would also pay a $50 million fine.

Of course, the “devil is always in the details,” and the precise terms of the settlement won’t be known until formal agreements are signed. Investors affected by these settlements should monitor the process and carefully analyze the formal agreements.

Wachovia’s settlement follows on the heels of earlier settlements made by the regulators with UBS, Citigroup, JP Morgan, and Morgan Stanley. There are ongoing investigations and likely actions against Merrill Lynch, Goldman Sachs, Bank of America, RBC, Lehman Brothers, Oppenheimer, Credit Suisse, and Raymond James.

In a related matter, New York State Attorney General, Andrew Cuomo, has reportedly advised both Goldman Sachs and Merrill Lynch that actions could be forthcoming against both firms unless they agree to similar settlement terms. According to sources, Cuomo has advised Merrill Lynch that it faces an imminent lawsuit from New York unless it reaches a satisfactory accord.

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 individual investors in auction-rate securities cases. For further information, please contact us.