Goldman Sachs is paying a $1.75 million fine to Florida regulators and spending more than $20 million to reimburse Florida investors who were misled about the safety and liquidity of investments known as auction-rates securities.
The New York financial firm has agreed to contact eligible investors and offer to buy back auction-rate securities that were sold on or before Feb. 11, 2008, and later became illiquid when the market for the securities froze, according to the Florida Office of Regulation, which announced the settlement Tuesday.
"Goldman Sachs was wrong and OFR regulators will not tolerate such games that toy with consumers' hard-earned money," said OFR Commissioner Tom Grady. "We're happy to report that billions (nationwide) have been returned to investors' pockets … where it belongs."
Auction-rate securities are a long-term debt instrument designed to trade like short-term securities. They were issued by many municipalities and closed-end mutual funds, and often pitched to small investors as safe and easily redeemable similar to money market funds. In early 2008, as the credit crunch intensified, the $300 billion auction-rate market froze, leaving investors unable to sell their holdings.
Other financial firms, including Citigroup, UBS, Wachovia, Bank of America, RBC Capital Markets, Deutsche Bank, TD Ameritrade and Raymond James Financial, have reached similar settlements with regulators. More than $61 billion in three years has been reimbursed to ARS investors across the country.