Swiss Banking Laws Key To Rescuing Wall Street and Consumers?

In a recent move, Switzerland’s second largst bank, Credit Suisse, has agreed to buy back more than half a billion dollars in securities and a hefty fine of fifteeen million dollars. The settlement arose due to an investigation by New York’s Attorney Genera;, Andrew Cuomo. The agreement stipulates that Credit Suisse will buy back securities from “individuals, charities and small businesses with accounts valued up to $10 million” according to

North American Securities Administrators Association (NASAA) – the oldest international organisation devoted to investor protection.

In consideration of the settlement, American states will agree to terminate their investigation of Credit Suisse’s marketing and sale of such securities to individual investors.

The ARS market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions, some as frequently as every seven days.

Market meltdown

They were sold as being as safe as cash but the market fell apart amid the downturn in credit markets.

Investigators have been trying to work out who was responsible and whether banks knowingly misrepresented the safety of the securities when selling them to investors.

In a statement from New York, the Zurich-based bank noted: “Credit Suisse neither admits nor denies allegations of wrongdoing.”

Eligible individual investors must have bought their ARS through Credit Suisse before February 14, it added.

The bank joins a growing list of major financial institutions – including Switzerland’s largest bank UBS – to reach settlements, with more than $51 billion targeted for repurchase, and state and federal penalties totalling an estimated $537 million.

“The industry is taking responsibility for correcting a problem they helped create, and that’s a good thing,” Cuomo commented in a statement.

« The industry is taking responsibility for correcting a problem they helped create… »

Andrew Cuomo, New York State Attorney General

“Return money”

“The fundamental goal has been to return money into the hands of investors, and that’s what these deals do.”

NASAA President Karen Tyler was also satisfied with the Credit Suisse settlement.

She described it as “another step on the road to recovery for thousands of Main Street investors who have been trapped in the auction rate securities meltdown”.

UBS last month announced a comprehensive settlement, in principle, for all clients holding auction rate securities at an estimated cost to the bank of $900 million.

It pledged to buy a total of $8.3 billion of ARS at face value from most private clients during two years from January 1, 2009. However, private clients and charities holding less than $1 million in household assets would be able to obtain this relief from October 31.

It said it would also provide solutions to institutional investors and agreed to buy all or any of the remaining $10.3 billion at face value from its institutional clients from June 30, 2010.

In July, UBS announced its intention to buy back up to $3.5 billion in auction-rate securities in the face of a lawsuit by Massachusetts’ authorities.

swissinfo with agencies

UBS, Switzerland’s largest bank, has similarly agreed  to reimburse shareholders

Andrew Cuomo, New York state’s Attorney General, “The industry is taking responibility for correcting a problem they helped create

NASAA President Karen Tyler  the Credit Suisse settlement.

She described it as “another step on the road to recovery for thousands of Main Street investors who have been trapped in the auction rate securities meltdown”.

UBS last month announced a comprehensive settlement, in principle, for all clients holding auction rate securities at an estimated cost to the bank of $900 million.

It pledged to buy a total of $8.3 billion of ARS at face value from most private clients during two years from January 1, 2009. However, private clients and charities holding less than $1 million in household assets would be able to obtain this relief from October 31.

It said it would also provide solutions to institutional investors and agreed to buy all or any of the remaining $10.3 billion at face value from its institutional clients from June 30, 2010.

In July, UBS announced its intention to buy back up to $3.5 billion in auction-rate securities in the face of a lawsuit by Massachusetts’ authorities.

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