Mon, Jul 20th, 2009

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Instead of the carrot-and-stick approach, New York Atty. Gen. Andrew Cuomo on Monday used two sticks in his campaign to force Charles Schwab Corp. to pay off clients in those notorious auction-rate preferred securities.

For stick No. 1, Cuomo threatened Schwab with a lawsuit if the discount brokerage fails to agree to buy back the offending securities.

For stick No. 2 , Cuomo resorted to peer pressure: He announced that Schwab rival TD Ameritrade Inc. settled a similar case and will repurchase $456 million of the securities. The Securities and Exchange Commission also announced a settlement with TD Ameritrade, which won’t pay any fines as part of the deals.

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