Galvin Settles Securities Claim With BOA
Secretary of the Commonwealth William Francis Galvin announced that a settlement has been reached that will allow Massachusetts buyers of Bank of America auction-rate securities to access their money.
The settlement is nation-wide, Galvin's office said in a statement, and resolves the Massachusetts Securities Division's investigation into Bank of America's marketing of auction-rate securities.
Under the agreement, Bank of America will offer to buy back all of its illiquid auction-rate securities from all customers nationwide beginning Oct. 1. The buy-back arrangement will continue through Dec. 31.
The buy-back offer is also extended to small business customers that have up to $10 million on deposit and charitable organizations that have up to $25 million on deposit.
Bank of America has also agreed to a streamlined arbitration process for the payment of damages, refunds for certain customers and refunds of certain finance fees.
Bank of America stopped supporting its auction-rate securities program in February, resulting in a flood of complaints from investors "who were shocked to find that they could not withdraw money from their accounts," Galvin's office said.
An investigation found that as Bank of America continued to sell the investments, clients were not made aware of the increasing risk of collapse in the auction-rate securities market.
An auction-rate security is a long-term debt issue that acts like a short-term issue because its interest rate is reset about every month. Interest on an auction-rate security is typically paid either quarterly or every six months.
Last month, Galvin charged Merrill Lynch with securities fraud related to the sale of auction-rate securities.
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