Friday, September 11, 2009

Schwab Mixes It Up

"Charles Schwab has long touted his anti-Wall Street credentials as proof he cares about small investors. Now he has gone against Wall Street in a different way, fighting back against New York Attorney General Andrew Cuomo, who is pushing to get the major brokerage firms to cover losses for clients who invested in auction-rate securities. ... Nearly every major firm on Wall Street has bowed to pressure from Mr. Cuomo and agreed to pay a total of more than $60 billion to buy back the securities from investors, marking the biggest settlement for individual investors in history. ... For Mr. Schwab, the feud goes beyond these securities. He says Mr. Cuomo is going too far, arguing that his firm just sold the securities and didn't underwrite them. ... Mr. Cuomo's office sued Schwab last week, alleging that the company committed civil fraud in selling auction-rate securities to its customers. ... The company says the allegations lack merit and disputes the idea that distributors should have the same responsibility as underwriters of auction-rate securities. ... On its Web site, Schawb has published statements aligning itself with other victims of misinformation about the auction-rate securities market and state that Mr. Cuomo 'hastily settled' with large Wall Street firms that have been let 'off the hook' by not being forced to buy securities from clients of so-called downstream firms like Schwab", my emphasis, Liz Rappaport at the WSJ, 25 August 2009, link:

I'm with Schwab on this. His firm should not bear underwriters' liability.


Anonymous said...

It would be interesting to know how the securities and the auction process was represented to Schwab by the underwriters... and was there special pricing for the securities to Schwab... what were the markups on ARS relative to other fixed income securities from dealers?

Independent Accountant said...

I agree