New York Attorney General Andrew Cuomo reportedly intensified his auction-rate securities investigation, focusing on Bank of America, Goldman Sachs, and Deutsche Bank. Brokerages were also warned in a letter issued by Cuomo’s office yesterday that they are not exempt from the scope of the investigation.
Cuomo’s office said the three firms were next on its its list of an industry-wide probe which so far has resulted in five major banks agreeing to buy back billions of dollars of illiquid debt without admitting wrongdoing.
In the letter, Cuomo’s office wrote to the Regional Bond Dealers Association that his office found “disturbing facts” pertaining to sales of auction-rate debt by brokerages, according to The New York Times.
“The investigation has already begun to uncover some disturbing facts that seem to belie the innocent picture of downstream brokerages you paint in your letter,” said Wednesday’s correspondence, referring to an August 15 to RBDA letter about licensed broker-dealers that see themselves as victims of the larger dealers.
Fidelity, Merrill Lunch, and Charles Schwab were all mentioned in the letter. The letter did not indicate that legal action was pending but did note that brokerages who encouraged investors while knowing that the securities were in trouble, would be held accountable.