Coming to A Town Near You
May 8th, 2008 at 7:42 am by Susie
If not your own town:
A major Wall Street firm agreed to return $37 million to 17 cities and towns in the state, as well as to the Massachusetts Turnpike Authority, after it allegedly misled them into buying investments they thought were as safe as cash.
UBS Financial Services Inc. reached an agreement with Attorney General Martha Coakley after she found that the brokerage had not fully disclosed the risks of the investments, known as auction-rate securities. Cities were unable to get their hands on their money when the market for these investments evaporated almost overnight.
Winchester, which had invested more than any other town, will receive $6.8 million in the settlement. The turnpike will receive $4.4 million, and the city of Holyoke and its retirement system will get $3.2 million.
“There have been a lot of new financial products,” Coakley said. “There’s been a heavy push by brokers to sell them, and a rush by cities and towns to take advantage of what appeared to be a burgeoning market.”
The settlement was the first admission by UBS or any US brokerage that something may have been amiss in the sales of municipal debt securities. The market for these securities relied on weekly and monthly auctions run by brokerage firms. But starting in February the auctions attracted only sellers and no buyers, so the market failed.
