Charles Schwab denies Cuomo’s accusation of civil fraud with ARS

The largest US online brokerage Charles Schwab Corp declined New York Attorney General Andrew Cuomo’s claim concerning civil fraud in its marketing and sale of Auction Rate Securities (ARS).

Previously, the Wall Street Journal reported that as part of the investigation process into the sales of ARS Cuomo told a Charles Schwab affiliate that his office is planning to sue it for civil fraud. Como’s letter includes emails and testimony quotations that show Charles Schwab & Co's brokers had little idea of what they were selling to clients and later failed to tell them the market for ARS was in the recession. 

In his letter Cuomo states his office would be open to a settlement with Schwab, but he also added that the brokerage must buy back the securities from investors still stuck with them. 

However Schwab claims it did not create the products and had no any involvement in the events that led to the ARS market recession. 

As Charles Schwab Corp reports, company’s brokers, while trained to levels beyond industry standards, could not be expected to predict and detect market risks that even regulators and market experts did not expect. 

In February 2008 about 900 Charles Schwab customers had ARS worth $789 million but only a small part of that amount was outstanding now.