Economy-Finance

Fidelity nears settlement with Cuomo

September 13th, 2008 | by admin |

September 12, 2008: 12:26 PM EDT
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NEW YORK (AP) — Fidelity Investments was close to settling an investigation led by New York Attorney General Andrew Cuomo into the company’s sales of auction-rate securities, a person close to the talks said Friday.

The mutual fund company will agree to buy back $300 million worth of the securities from its customers, said the person, who was not authorized to speak publicly ahead of the official announcement. Cuomo is expected to announce the deal by this afternoon.

Cuomo is leading an investigation into how major Wall Street investment banks and smaller financial companies pitched auction-rate securities to customers. The securities were marketed as being as safe as cash until the market froze up amid the credit crisis, causing investors to lose money.

A spokesman for Fidelity was not immediately available for comment.

Cuomo, leading the investigation on behalf of state and federal authorities, has reached deals with eight investment banks to buy back more than $50 billion worth of auction-rate securities.

The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt, but the interest rates on the investments were reset at regular auctions, some as frequently as once a week.

The market for them collapsed in February amid the downturn in the broader credit markets. Regulators have been investigating the collapse to determine who was responsible for its demise and whether banks knowingly misrepresented the safety of the securities when selling them to investors.