Auction Rate Securities: What Now?
It’s bonus time on Wall Street, and individual and institutional investors of auction rate securities (ARS) should be up in arms. While the financial press reports that some of the nation’s biggest banks - including Goldman Sachs, Bank of America, JP Morgan Chase and Citigroup - have set aside billions of dollars in bonuses for 2009, untold numbers of ARS investors are still in dire financial straits. And they have been since February 2008, when the market for auction rate securities came to an abrupt standstill.
Today, investors of auction rate securities are left with little recourse to recover their now-illiquid investments. They can attempt to unload the instruments, albeit at a loss, on the secondary market or file a complaint with the Financial Industry Regulatory Authority (FINRA.)
Either way, the same investment firms and banks that were taken to task by state and federal regulators for allegedly failing to disclose the risks associated with auction-rate securities are now patting themselves on the back with outrageous bonus packages.
When the auction rate market collapsed in February 2008, investors were hit hard. They couldn’t access their supposedly liquid investment, leaving many forced to postpone plans for retirement or pay other expenses.
Eventually, the ARS meltdown led many financial firms to reach settlements with state regulators to buy back auction rate securities from retail clients and some smaller businesses.
Larger institutional ARS investors, however, were not so lucky. They still hold billions of dollars worth of auction rate securities that can’t be sold or are sharply reduced in value.
Meanwhile, in letters sent Jan. 11 to eight major banks - Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo - New York Attorney General Andrew Cuomo is requesting a slew of information about Wall Street’s 2009 bonuses. The banks have until Feb. 8 to respond.
Investors should pay close attention to their responses.
Our affiliation of lawyers is actively advising individual and institutional investors and evaluating their legal options concerning auction rate securities. Tell us about your investment losses; leaving a message in the Comment Box below or via the Contact Us form.
