NYS AG PURSUES CONSEQUENTIAL DAMAGES IN ARS CASES
In a recent settlement with the New York State Attorney General concerning the sales of auction rate securities, the respondent agreed to an arbitration procedure to “resolve claims of consequential damages suffered by retail investors as a result of not being able to access their funds.” These consequential damages would be in addition to the $8.5 Billion that the respondent agreed to return to investors through repurchases. The New York State Attorney General has announced settlements with 5 institutions covering nearly $35 Billion in auction rate securities.
OUR TAKE: Pursuing consequential damages related to loss of access to funds is very unusual. Taken to an extreme, the amount awarded in such an arbitration could dwarf the amounts of restitution already paid.