Settlement with 15 Broker-Dealer Firms for Violative Practices in the Auction Rate Securities Market

The SEC charged the respondent broker-dealer firms with auction practices that favored certain customers over others, or that had the effect of favoring the issuer over customers, or vice versa. This conduct included, for example: (i) allowing customers to submit or change orders, after auction deadlines; (ii) not requiring certain customers to purchase partially-filled orders even though the orders were supposed to be irrevocable; (iii) having an express or tacit understanding to provide certain customers with higher returns than the auction clearing rate; and (iv)providing certain customers with information that gave them an advantage over other customers in determining what rate to bid. The combined sanction of approximately $13 million was relatively light in observance of respondents’ cooperation.