The Financial Industry Regulatory Authority Inc. today announced agreements in principle with Bank of New York Mellon Capital Markets LLC, City National Securities Inc. and Harris Investor Services Inc. to settle charges related to the selling and marketing of auction rate securities.
Under the agreements, Bank of New York Mellon, Beverly Hills, Calif.-based City National Securities and Chicago-based Harris will repurchase up to $60 million of auction rate securities sold to investors between May 31, 2006 and Feb. 28, before the market for the securities dried up.
New York and Washington-based Finra's investigation found evidence that each firm sold auction rate securities using advertising, marketing materials or other internal communications with its sales force that didn’t warn investors about the risks associated with the investment vehicles.
Finra also imposed financial penalties. Bank of New York Mellon must pay a fine of $250,000, City National Securities $315,000 and Harris $150,000.
Each firm has also agreed to provide notice to its eligible customers promptly.
If the settlements are approved, the firms will neither admit nor deny the charges but will consent to Finra's findings.
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