Nuveen Investments fine by FINRA over Auction Rate Securities

According to the Investment News, the Financial Industry Regulatory Authority Inc. has hit Nuveen Investments LLC, the broker-dealer subsidiary of Nuveen Investments Inc., with a $3 million fine for allegedly creating misleading materials in the marketing of auction-rate preferred securities.

Nuveen was one of a number of closed-end fund providers that suffered when the auction-rate market effectively shut down in 2008, leaving preferred shareholders in funds managed by Nuveen and other firms stuck with paper they couldn’t redeem.

Auction-rate securities are bonds with rates that periodically reset at auctions. In theory, an ARS offers a higher interest rate than normally would be paid for a short holding period. Municipalities auction-rate preferred securities to boost the performance of their investment portfolios.

Closed-end fund managers, like Nuveen, issued preferred auction-rate securities to attract retail investors.

According to the Finra complaint, by early 2008, over $15 billion of Nuveen’s auction-rate preferred securities had been sold to retail customers by broker-dealers. While Nuveen didn’t sell the securities, it did create the marketing materials that brokers used to sell them. And those brochures “failed to adequately disclose liquidity risks for ARPS,” according to a statement issued by Finra today.

Finra also alleged that Nuveen failed to update the brochures after Lehman Brothers Holdings Inc., which managed about $2.5 billion of ARPS, notified Nuveen in January that it would stop managing Nuveen auctions, according to its statement.

With the settlement, Nuveen neither admitted or denied wrongdoing, according to a statement issued by Nuveen. Since the freezing of the ARPS market, Nuveen has launched a “comprehensive communications campaign” to keep shareholders informed about the market, Nuveen said in its statement.

If you have questions about investments you made with Nuveen Investments, the securities attorneys of The White Law Group may be able to help.  To speak with a securities attorney, please call the firm’s Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.