Citigroup Incorporated must buy back at par student loan auction rate securities purchased by Faegre & Benson LLP client Intevac Inc.
While prior auction rate securities cases have been arbitrated against Citigroup, this is the first in which a Financial Industry Regulatory Authority arbitration panel has ordered the seller to buy back the securities at the full price paid by the customer. Under the award issued June 29 by the arbitration panel, Citigroup has 30 days to complete the purchase.
Intevac currently holds $55.2 million par value in student loan auction rate securities purchased from Citigroup. The $300 billion auction rate securities market collapsed in February 2008 when Citigroup and other major broker-dealers stopped supporting it. Investors were left with no way to liquidate securities they had purchased as cash-equivalent investments.
The SEC and other regulators negotiated settlements with Citigroup and others, which required that retail and small institutional investors be made whole. The settlements provided no such relief for larger investors like Intevac.
Intevac filed the FINRA claim on March 2009 requesting that Citigroup purchase its student loan auction rate securities at par. The award requires repurchase at par and also allows Intevac to keep all returns on the ARS from purchase to the date of the Citigroup buy back.
Robert L. Schnell, co-chair of the Faegre & Benson securities and financial markets litigation practice, represented Intevac in this matter.