NEW YORK, Feb 17 (Reuters) - Charles Schwab Corp has agreed to settle a 2009 lawsuit in which New York’s attorney general accused the discount brokerage of fraud in the sale and marketing to investors of auction-rate securities that became illiquid.
Terms were not disclosed in a settlement between Schwab and Attorney General Eric Schneiderman, which was made public in a Feb. 13 filing with the state Supreme Court in Manhattan.
Schwab spokesman Greg Gable said the San Francisco-based company is pleased to settle. Liz DeBold, a spokeswoman for Schneiderman, confirmed the settlement.
Auction-rate securities had interest payments that reset at periodic auctions.
Many brokerages marketed the securities as being as safe as cash, but much of the debt became illiquid in February 2008 when dealers stopped supporting the market.
The lawsuit against Schwab was initially filed in August 2009 by Andrew Cuomo, then New York’s attorney general and now its governor.
Cuomo sued after having persuaded financial companies that sold or underwrote auction-rate securities to buy back more than $61 billion of the debt. Other brokerages to settle included Fidelity Investments and TD Ameritrade Holding Corp.
Schwab had in October 2011 won the dismissal of Cuomo’s lawsuit, which Schneiderman inherited by that time. A state appeals court revived two claims brought under the state’s Martin Act, a powerful securities law, in August 2013.
The case is New York v. Charles Schwab & Co, New York State Supreme Court, New York County, No. 453388/2009. (Reporting by Jonathan Stempel and Karen Freifeld in New York; Editing by Cynthia Osterman)