Raleigh, N.C. — The North American Securities Administrators Association announced Tuesday that a settlement had been reached in principle between Credit Suisse Securities (USA) LLC and state securities regulators, including the North Carolina Secretary of State's Office.
The settlement would provide relief for Credit Suisse clients who have had their funds frozen in the auction rate securities market, officials said.
The Securities Division of the North Carolina Secretary of State's Office led an investigation of allegations that Credit Suisse misled clients by falsely assuring them that auction rate securities were as safe and liquid as cash. The auction rate markets froze in February, triggering complaints from investors who couldn't withdraw money from their accounts.
“I am pleased that we produced an outcome that can help ease the hardships that many of these investors faced after losing access to their money,” Secretary of State Elaine Marshall said in a statement. “This settlement is the result both of efficient and effective enforcement work by state securities regulators and a willingness by Credit Suisse to arrive at a solution that addresses the needs of its clients.”
Under the terms of the settlement, Credit Suisse agreed to buy back by Dec. 11 all auction rate securities purchased through the firm by individual investors since Feb. 14 that haven't been auctioned. The deal also calls for the firm to fully reimburse individual investors who sold their auction rate securities at a discount after the market failed, resolve investors' damage claims through arbitration and pay $15 million in civil penalties to states.
The investigation into possible violations by Credit Suisse is part of a larger, ongoing state-led effort to address problems in connection with the offer and sale of auction rate securities, officials said.