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 Terms were not disclosed in a settlement between Schwab and Attorney
General Eric Schneiderman, which was made public in a Feb. 13 filing
with the state Supreme Court in Manhattan.
Schwab spokesman Greg Gable said the San Francisco-based company is
pleased to settle. Liz DeBold, a spokeswoman for Schneiderman,
confirmed the settlement.
Auction-rate securities had interest payments that reset at periodic
auctions.
Many brokerages marketed the securities as being as safe as cash,
but much of the debt became illiquid in February 2008 when dealers
stopped supporting the market.
The lawsuit against Schwab was initially filed in August 2009 by
Andrew Cuomo, then New York's attorney general and now its governor.
Cuomo sued after having persuaded financial companies that sold or
underwrote auction-rate securities to buy back more than $61 billion
of the debt. Other brokerages to settle included Fidelity
Investments and TD Ameritrade Holding Corp.
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Schwab had in October 2011 won the dismissal of Cuomo's lawsuit,
which Schneiderman inherited by that time. A state appeals court
revived two claims brought under the state's Martin Act, a powerful
securities law, in August 2013.
The case is New York v. Charles Schwab & Co, New York State Supreme
Court, New York County, No. 453388/2009.
(Reporting by Jonathan Stempel and Karen Freifeld in New York;
Editing by Cynthia Osterman)
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