As promised, New York Attorney General Andrew Cuomo has turned his attention on 40 brokerages that sold auction-rate securities to investors but did not underwrite the debt. Until now, these investigations have focused on the big investment banks. The investigation of smaller brokerages begins this Monday as the Financial Industry Regulatory Authority (FINRA) gears up to complete on-site examinations at the brokerages.
FINRA will be trying to determine whether or not each brokerage was aware of the problems in the market and whether or not they attempted to warn investors of the potential risks.
These investigations have led to settlements with eight large firms. These firms have agreed to repurchase around $50 billion of the $60 billion in auction-rate securities debt.
In an interview on CNBC, Cuomo stated, “We’re starting with the largest banks, in terms of number of people involved…and we’re working our way down the list. We’re now focusing on some of the mid-size players in the market.”
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