The U.S. Securities and Exchange Commission said Monday that it has settled charges against TD Ameritrade, Inc. over allegations that it made inaccurate statements when selling auction rate securities.

Similar to other settlements with firms over their ARS sales, this deal will provide its customers the opportunity to sell any ARS bought prior to the collapse of the market for these securities (in February 2008) back to the firm. The SEC previously announced settlements over similar issues with Citigroup and UBS, Wachovia, Bank of America, RBC Capital Markets, and Deutsche Bank.

According to the SEC’s administrative order, TD Ameritrade’s registered representatives told customers that ARS were an alternative to certificates of deposit and money market accounts, although they are actually very different investments. Among other things, it also claimed that the firm’s reps did not tell customers about the complexity and risks of ARS, including their dependence on successful auctions for liquidity.

The commission censured the firm, ordered it to cease and desist from future violations, and reserved the right to seek a financial penalty against the firm, which consented to the order without admitting or denying the SEC’s allegations.

“TD Ameritrade is the latest in a series of landmark ARS settlements that bring unprecedented relief to tens of thousands of investors,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “ARS customers of numerous firms can get back all of the money they invested in auction rate securities as more than $50 billion in liquidity is being made available to them through these historic settlements.”

“Given our financial strength and the ongoing illiquidity in the auction rate securities market, initiating a buy-back program of this nature is the right thing to do for our clients,” said Fred Tomczyk, president and CEO at TD Ameritrade.

“While our role in the market for these securities was significantly different from that of other financial institutions that have previously announced similar programs, we believe this is the best way for us to help clients who have been unable to find liquidity in the current market environment,” Tomczyk added.

IE