According to published reports, Mr. Cuomo sent a letter of intent July 17 to the San Francisco- based brokerage firm saying he would sue unless Schwab agrees to buy back auction-rate securities from investors, the attorney general's office said.
Charles Schwab Corp, has denied allegations by New York Attorney General Andrew Cuomo of civil fraud in its marketing and sale of auction rate securities (ARS).
The Wall Street Journal earlier reported that as part of his investigation into the sales of ARS, Mr. Cuomo told a Charles Schwab affiliate that his office is planning to sue it for civil fraud, citing an official notice sent on Friday.
According to published reports, Mr. Cuomo sent a letter of intent July 17 to the San Francisco- based brokerage firm saying he would sue unless Schwab agrees to buy back auction-rate securities from investors, the attorney general’s office said.
Companies including Citigroup Inc., UBS AG and Merrill Lynch & Co. last year agreed to repurchase more than $50 billion in debt to settle regulatory claims they improperly touted the investments as safe, cash-like investments. Banks managing auctions abandoned the $330 billion market in February 2008, stranding thousands of investors who could no longer sell the securities at periodic biddings.
In a statement, Schwab called Cuomo’s allegations “without merit” and said the attorney general “unfairly lay blame on our company for an illiquid market and improper behavior by the large Wall Street firms.”
Cuomo’s office said Schwab executives received reports in late 2007 that the auction-rate securities market was declining and didn’t tell clients. The Wall Street Journal earlier reported on Cuomo’s intent to sue.
