The Financial Industry Regulatory Authority has announced today that it has agreed to settlements with 3 more firms to settle charges of failing to disclose the risks of auction rate securities they sold.
The ARS became illiquid when auction sales of the securities froze in February 2008.
The settlements announced today included Northwestern Mutual Investment Services L.L.C., a unit of Northwestern Mutual Life Insurance Company, Milwaukee, which was fined $200,000.
The others were City Securities Corporation, Indianapolis, fined $250,000; and Fifth Third Securities Inc., a unit of Fifth Third Bancorp, Cincinnati, fined $150,000.
According to FINRA, all 3 firms agreed to offer to buy back ARS sold to their customers where the auctions for the ARS had failed–around $103 million for Northwestern Mutual, $13.1 million for City Securities and $11.9 million for Fifth Third.
“We are gratified that these firms agreed to initiate or complete offers to buy back frozen ARS from their customers,” said L. Merrill, executive vice president and chief of enforcement for FINRA, Washington.
FINRA said its investigation found that each firm sold ARS using advertising, marketing materials or communications with its sales force that were not fair and balanced or that failed to contain adequate disclosure of the risks of ARS, such as the potential for ARS auctions to fail.