New York (HedgeCo.Net) – Wachovia customers who invested in auction rate securities prior to their collapse will most likely get their money back.  The SEC announced a settlement yesterday with Wachovia Securities that will provide $7 billion in liquidity to those clients, which resolves the agency’s original charges that the bank misled investors about the risks associated with ARS.

"The goal of the SEC in these matters was to return as much liquidity to investors as quickly as possible, while at the same time avoiding further disruption in the financial markets. Today’s final settlement with Wachovia represents substantial progress toward fulfilling that goal,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.

The original SEC complaint alleged that Wachovia peddled ARS to clients, while representing them as safe, highly liquid investments, much like cash or money market instruments.  In addition, the agency charges that the bank became aware of the mounting risks associated with these investments, yet continued to market them as safe.  When the ARS market plummeted, thousands of clients were left with billions of dollars of illiquid investments.

"Wachovia did not ensure that its sales force understood the ARS products it was selling. As a result, Wachovia’s customers were not adequately informed of the nature and risks associated with ARS and were caught holding illiquid securities when the ARS market froze," explained Merri Jo Gillette, Director of the SEC’s Chicago Regional Office.

The settlement has several facets, including buying back ARS from investors who purchased them on or before February 13, 2008.  For more information on the matter, or for buyback eligibility, the SEC suggests you contact Wachovia directly at 1-866-283-7943.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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