FINRA Announces Agreements in Principle with Three Additional Firms to Settle Auction...

FINRA Announces Agreements in Principle with Three Additional Firms to Settle Auction Rate Securities Violations

Agreements Include Offers to Repurchase Over $60 Million of ARS
Holdings at Par
WASHINGTON--(Business Wire)--
The Financial Industry Regulatory Authority (FINRA) announced
today that it has reached agreements in principle with City National
Securities (CNS) of Beverly Hills, CA, BNY Mellon Capital Markets, LLC
of New York and Harris Investor Services, Inc. of Chicago, to settle
charges relating to the sale of Auction Rate Securities (ARS). Each of
the principle agreements is subject to being formalized in an approved
settlement document called a Letter of Acceptance, Waiver and Consent
(AWC).

Last month, FINRA announced similar agreements in principle with
five firms. Investigations continue at a number of additional firms.

In the actions announced today, CNS, BNY Mellon and Harris have
agreed to offer to repurchase at par ARS that were purchased by
individual investors and some institutions between May 31, 2006, and
Feb. 28, 2008. A total of more than $60 million of ARS are eligible
for repurchase. The firms have also agreed to make whole individual
investors who sold ARS below par after Feb. 28, 2008. CNS will pay a
fine of $315,000, while BNY Mellon will pay a fine of $250,000 and
Harris is being fined $150,000.

The firms also agreed to the appointment of an independent,
non-industry arbitrator to resolve investor claims for any
consequential damages - that is, damages they may have suffered from
their inability to access funds invested in ARS. "In all of our
Auction Rate Securities investigations and settlements, FINRA's
primary goal continues to be the restoration of investors' access to
the millions of dollars they invested in ARS," said Susan L. Merrill,
FINRA Executive Vice President and Chief of Enforcement.

In addition to individual investors, those eligible for ARS
repurchase and/or payments for ARS sold below par include non-profit
charitable organizations and religious corporations or entities.
Trusts, corporate trusts, corporations, pension plans, educational
institutions, incorporated non-profit organizations, limited liability
companies, limited partnerships, non-public companies, partnerships,
personal holding companies and unincorporated associations that made
individual ARS purchases and whose account value did not exceed $10
million will also be eligible.

Each firm has agreed to provide notice to its eligible customers
promptly. Repurchases must begin no later than 30 days after the
settlement is approved and must be completed no later than 60 days
after settlement approval. Beginning six months after settlement
approval, each firm has also agreed to make its best efforts to
provide liquidity to all other investors who purchased during the same
time period but who were not eligible for the initial repurchase.
Those best efforts may include offers to repurchase ARS and/or offers
of low- or no-interest loans.

FINRA's investigation has found evidence that each firm sold ARS
using advertising, marketing materials or other internal
communications with its sales force that were not fair and balanced
and therefore did not provide a sound basis for investors to evaluate
the benefits and risks of purchasing ARS. FINRA's investigation also
found evidence that each firm failed to establish and maintain a
supervisory system reasonably designed to achieve compliance with the
securities laws and FINRA rules with respect to the marketing and sale
of ARS.

In the forthcoming formal settlement documents, the firms will
neither admit nor deny the charges, but will consent to the entry of
FINRA's findings.

Earlier this year, FINRA released guidance for investors caught in
the auction failures in the Investor Alert Auction Rate Securities:
What Happens When Auctions Fail.

Investors can obtain more information about, and the disciplinary
record of, any FINRA-registered broker or brokerage firm by using
FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge.
In 2007, members of the public used this service to conduct 6.7
million reviews of broker or firm records. Investors can access
BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.

FINRA is the largest non-governmental regulator for all securities
firms doing business in the United States. FINRA is dedicated to
investor protection and market integrity through effective and
efficient regulation and complementary compliance and technology-based
services. FINRA touches virtually every aspect of the securities
business - from registering and educating industry participants to
examining securities firms; writing rules; enforcing those rules and
the federal securities laws; informing and educating the investing
public; providing trade reporting and other industry utilities; and
administering the largest dispute resolution forum for investors and
registered firms.

For more information, please visit our Web site at www.finra.org.

Financial Industry Regulatory Authority (FINRA)
Nancy Condon, 202-728-8379
Herb Perone, 202-728-8464

Copyright Business Wire 2008