RICHMOND — Goldman, Sachs & Co. is paying more than
$333,000 to the Commonwealth of Virginia to settle allegations that Virginia investors
were misled about the liquidity of the auction-rate securities market.
The State Corporation Commission (SCC) has issued a consent order finalizing Virginia’s
participation in a global settlement involving the New York-based firm.
Under the terms of the settlement, the financial services firm is required to confirm
that it has repurchased auction-rate securities from its clients.
Although marketed and sold to investors as safe, liquid, and cash-like investments,
auction-rate securities were actually long-term investments subject to a complex
auction process that failed in early 2008, leading to illiquidity and lower interest
rates for investors.
The global settlement was achieved by a multi-state task force of state regulators
formed by the North American Securities Administrators Association. During the investigation,
state regulators discovered that various securities dealers misrepresented the characteristics
of and the risks associated with buying auction-rate securities.
The SCC’s Division of Securities and Retail Franchising actively participated as
a member of the task force. The task force was formed in April 2008, shortly after
the division and other state securities regulators began receiving complaints from
investors holding these instruments.
Case number SEC-2010-00056