JPMorgan Chase & Co. on Thursday agreed to pay a $1.1 million fine to New Jersey and repurchase $91.3 million in auction-rate securities from clients in the state to settle claims that it failed to disclose the investment's risks.
The accord brings to more than $1 billion the amount of auction-rate debt six firms have agreed to repurchase from New Jersey investors, state Attorney General Paula Dow said.
JPMorgan Chase was among the firms that marketed the investments as safe and cash-like, and failed to disclose the risk of the securities becoming illiquid, she said.
Auction-rate securities allow issuers to sell debt maturing in as long as 40 years at short-term rates that reset every 7, 28 or 35 days through bidding.
The $330 billion auction-rate market seized up in February 2008, when the credit crisis prompted Wall Street firms to stop supporting the periodic auctions in which the securities were bought and sold.