Lindeen Announces $14 Millon Settlement To Resolve Allegations Of Securities Fraud

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Montanans Victims to Receive Restitution

HELENA, Mont. – Montana investors who lost millions to a multi-national securities firm will be getting their money back. Montana State Auditor and Commissioner of Securities Monica Lindeen today announced a settlement with Wachovia Securities, LLC and Wachovia Capital Markets, LLC in regards to auction rate securities (ARS).

“This settlement again demonstrates the commitment of our office to protect investors from fraud and abuse,” said Lindeen. “We will do everything in our power to protect Montanans, obtain restitution for victims and bring the perpetrators to justice.”

In the settlement, Montana investors will receive $14,033,000 to fully restore their losses and liquidity from investments made in ARS through Wachovia. In addition to restoring investor losses and liquidity, Wachovia agreed to and has paid a $148,811.54 fine that will be deposited into the state’s general fund.

“Given the current economic situation and turmoil on Wall Street, today’s settlement represents a step toward providing a measure of relief for Montanans who have been trapped in auction rate securities for over a year,” said Lindeen.

Auction-rate securities are preferred shares or debt instruments such as corporate or municipal bonds. They have a long-term maturity and are sold at monthly or weekly auctions, and until recently were treated by many investors as cash investments. However, the auction-rate security market collapsed, bringing auctions to a halt and leaving investors illiquid investments.

The settlement is the result of a multi-state task force investigation into alleged misrepresentations made by Wachovia to its customers about the liquidity risk associated with ARS. During the past several years, ARS were sold to investors as cash alternatives, similar to money market funds, and many brokerage firms, including Wachovia, represented that they would provide one-day or same-day liquidity by purchasing customers’ ARS. In February 2008 there was a widespread auction failure and Wachovia investors were unable to liquidate their ARS, contrary to its representations.

“The investigation and settlement with Wachovia was a well-coordinated, collaborative effort,” said Lindeen. “It’s a terrific example of efficient and effective enforcement work by state securities regulators.”