Pennsylvania Securities Commission has reached an agreement with Deutsche Bank following an investigation into its marketing and sales of auction rate securities (ARS) to Keystone State investors. The agreement and final order requires Deutsche Bank to complete a repurchase of $37.6mn of ARS from Pennsylvania investors for this specific financial instrument in early 2008.
The final order approved by the commission also requires Deutsche Bank to pay an assessment of $344,384.49 to the Commonwealth for its role in the auction rate securities market. The commission is part of a 12-state task force of state securities regulators formed through the North American Securities Administrators Association (NASAA) to investigate brokerage firms who have underwritten, refinanced, and/or sold auction rate securities.
Pursuant to the Commission’s order, Deutsche Bank has repurchased securities from some 50 eligible Pennsylvania investors. Deutsche Bank has repurchased ARS from approximately 1,200 of its clients.
Robert Lam, chairman of Pennsylvania Securities Commission, said: “The Pennsylvania Securities Commission found that Deutsche Bank engaged in unethical or dishonest business practices and failed to supervise its agents for its sales of $43mn of auction rate securities to Pennsylvania investors. The ARS were sold as liquid, cash-alternative investments.
“Today’s settlement demonstrates the value of states working in concert to benefit investors nationwide. State securities regulators such as our brethren in New Jersey continue to lead efforts to ensure that investors receive redemptions for their frozen auction rate securities.”
Steve Irwin, Commissioner at Pennsylvania Securities, said: “The auction rate securities market was a $330 billion market that melted down. It was developed by the largest investment banking firms. What happens in this market is going to continue to play out over time.”
