Wachovia fined $50 million for auction rate securities misrepresentations

Wachovia will pay a $50 million penalty and buy back auction rate securities from investors under a settlement announced this week by the state Department of Financial Institutions. Washington will receive $500,000 under the agreement. Investors who purchased Wachovia auction rate securities products prior to Feb. 13, 2008, may be eligible for a buy back and should see this Web site for more information.

Auction rate securities are preferred shares or debt instruments such as corporate or municipal bonds. They have a long-term maturity and are sold at weekly or monthly auctions, and until recently were sold by many brokerage firms as cash equivalent investments. Wachovia allegedly told customers the securities were "safe" and "liquid" investments. But the market collapsed in February 2008 and Wachovia customers were unable to sell. See DFI's news release for more info.