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Paula T. Dow,
Attorney General

Division of Consumer Affairs
Thomas R. Calcagni, Director

  Bureau of Securities
Abbe R. Tiger, Chief
For Immediate Release:
October 4, 2011
For Further Information Contact:
Jeff Lamm, 973-504-6327
Neal Buccino, 973-504-6327

N.J. Division of Consumer Affairs Announces Wachovia and Raymond James to Repurchase Auction Rate Securities and Pay $3.26 Million in Civil Penalties under Separate Consent Orders Issued by Bureau of Securities

NEWARK - The New Jersey Bureau of Securities, within the Division of Consumer Affairs, has signed Consent Orders requiring Wachovia Securities, LLC and Wachovia Capital Markets, LLC ("Wachovia), and Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. ("Raymond James), to repurchase auction-rate securities (ARS) from New Jersey clients to settle allegations that the firms sold ARS without disclosing known risks of the ARS market.

Although marketed and sold to investors as safe, liquid, and cash-like investments, ARS were actually long-term investments subject to a complex auction process that failed in early 2008, causing illiquidity and significantly lower interest rates than investors had historically received.

At the time of the mass auction failures in February 2008, Wachovia's customers in New Jersey held approximately $900 million in ARS. As part of its findings, the Bureau determined that Wachovia failed to reasonably supervise its agents. Wachovia will repurchase $441 million in ARS from New Jersey investors and pay $3.2 million in civil penalties to the State under terms of the Consent Order.

Raymond James will repurchase $16.7 million in ARS from New Jersey investors and pay $35,000 in civil penalties, under terms of its Consent Order with the Bureau.

"When financial firms don't disclose all known risks to investors, they are violating our state securities law and the trust of their clients, Attorney General Paula T. Dow said. "In settling these cases, we're stressing the importance of proper disclosure going forward."

These Consent Orders represent the 14th and 15th settlements that the Bureau of Securities has reached with firms that sold ARS to New Jersey investors. To date, approximately $4 billion of these assets have been repurchased or offered to be repurchased from New Jersey investors as part of settlements with firms that marketed and sold these products. The firms have paid $22.4 million in civil penalties to the State.

"Consumers work hard to build up their savings. Their monies shouldn't be placed at unnecessary risk through non-disclosure of all known facts. These settlements put the financial industry on notice that we will act to protect investors, and hold firms accountable when our securities laws are violated, said Thomas R. Calcagni, Director of the State Division of Consumer Affairs.

The investigation into Wachovia's and Raymond James's role in the sale of these securities is part of a larger, state-led effort to address problems in connection with ARS investments. Early in 2008, state securities regulators began receiving complaints from investors throughout the country. As a result, 12 states, including New Jersey, formed a task force to investigate whether certain Wall Street firms had misled investors when selling them auction rate securities.

"State securities regulators have collectively taken on these cases, in our role as the primary protector of investors within our borders, said Abbe R. Tiger, Securities Bureau Chief. "We'll continue to be the investing public's watchdog as our Bureau investigators monitor the industry.

Bureau of Securities Investigating Attorney Peter C. Cole led New Jersey's efforts in securing these settlements and protecting Garden State investors.

The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The Bureau's website is located at


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