The U.S. Securities and Exchange Commission announced finalized settlements with RBC Capital Markets, Bank of America, and Deutsche Bank, to resolve charges that they misled investors regarding the liquidity risks associated with auction rate securities that they underwrote, marketed, or sold.

The SEC announced preliminary settlements with RBC and Bank of America last October 8. Wednesday’s finalized settlements with those two firms, and Deutsche Bank, provide nearly US$6.7 billion to approximately 9,600 customers who invested in ARS before the market for those securities froze in February 2008, the commission said.

According to the SEC’s complaints, filed in federal court in New York City, the three firms misrepresented to certain customers that ARS were safe, highly liquid investments that were comparable to money markets. It alleges that the firms failed to make their customers aware of growing liquidity risks.

Without admitting or denying the SEC’s allegations, the firms agreed to be permanently enjoined from violations of the broker-dealer fraud provisions and to comply with a number of undertakings, including offers to buyback small clients’ ARS at par, and to provide liquidity solutions for institutional and other customers.

“Through these latest settlements and prior ARS settlements with other firms entered into by the commission, more than US$50 billion in liquidity is being made available to tens of thousands of customers so they can get back all of the money they invested in auction rate securities,” said Scott Friestad, deputy director of the SEC’s division of enforcement.

IE