According to documents available from FINRA.org, “without admitting or denying the findings [of FINRA],” “Fidelity Brokerage Services LLC submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $375,000, and agreed to make an offer to repurchase illiquid auction rate securities (ARS) from certain customers who purchased ARS via the firm’s website between February 13, 2008, and March 4, 2008.”
In addition, “The firm agrees to arbitrate claims for consequential damages filed by the relevant class (individual investors who purchased eligible ARS from the firm at any time between May 31, 2006, and February 28, 2008, into accounts maintained at the firm) relating to eligible ARS through a special arbitration program (SAP) in accordance with rules set forth by FINRA. No later than 90 days after the date of FINRA’s acceptance of this AWC, the firm shall notify investors in the relevant class that they are eligible to participate in the SAP. This process is voluntary on the part of qualifying investors and does not preclude investors who elect not to participate in the SAP from pursuing other remedies.”
The FINRA documents the details of this SAP process as follows:
“Arbitration under the SAP shall be conducted by a single public arbitrator, unless the claim for consequential damages is $1,000,000 or greater, in which case a panel of three public arbitrators may be appointed if both parties agree. Any investors who choose to pursue such claims through the SAP shall bear the burden of proving that they suffered consequential damages and that such damages were caused by investors’ inability to access funds consisting of investors’ ARS purchases through the firm. The firm shall be able to defend itself against such claims provided, however, solely for the purposes of the SAP, the firm shall not contest liability related to the sale of ARS and shall not be able to use as part of its defense an investor’s decision not to sell ARS holdings prior to receiving a buyback offer from the firm nor the investor’s decision not to borrow money from the firm if such loan facility was made available to ARS holders. In determining the appropriate sanctions, FINRA took into account that the firm took significant steps to minimize the impact to customers of the illiquidity of the ARS market.”
For the full text of the release from FINRA.org you may visit http://www.finra.org/web/groups/industry/@ip/@enf/@da/documents/disciplinaryactions/p124305.pdf
If you are concerned about investments you have made in auction rate securities with Fidelity and would like to speak to a securities attorney about the SAP process as well as your other options, please contact our Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit http://www.whitesecuritieslaw.com.