According to a settlement agreement between Bank of America Corp and William Galvin, Commonwealth Secretary in Massachusetts, at least $4.8 billion worth illiquid auction rate securities will be repurchased by BoA from retail customers from all over the nation.
This includes deposits from charitable organizations totaling $25 million and at least $10 million deposits from small business customers. According to a spokesman from Galvin’s office, $4.8 billion is the approximate purchase price of the securities from small businesses and retail investors.
At least 5500 BoA customers are likely to be settled in auction rate securities according to a written statement issued by the bank. According to NYSE BAC, the NC based bank in Charlotte $275 million of pretax charge will be recorded from this repurchase of auction rate securities by BofA from its retail clients.
Galvin says this settlement will benefit clients by liquidating billions of dollars in the frozen auction rate securities market. The auction securities market fell through in the month of February following fears related to covering of debt services by corporate buyers. There is no denying or accepting responsibility for the situation by BoA.
However, complete co operation is provided by BofA for the investigations in progress by the NY State Attorney General’s office and SEC. According to Galvin, the BoA settlement is not a forerunner for similar action by other Securities and Exchange Commission and states.
Similar settlement is being initiated by Wachovia Securities, the retail brokerage unit of Wachovia Corp. This unit has agreed to settle upto $9 billion auction rate securities held by small businesses, retail investors and charities.