Large Investors Are Pursuing Auction Rate Securities Claims


The recent settlement between regulators and broker-dealers that sold auction rate securities are not good news for large and institutional investors, reports Law360 in a July 30 article entitled “Will Their Be An Onslaught of ARS Litigation?” The settlements typically require the defendant firms to by back auction rate securities from individual investors, nonprofits and small companies with less than $10 million in assets at the firm. On the other hand, the brokerage firms are only required to use their “best efforts” or “work with” large investors in addressing their liquidity problems. Armed with this knowledge, and the knowledge that the government will not assist them, a number of institutional investors have gone the self-help route by taking legal action. Among them are Ashland Inc. ($194 million), Braintree Laboratories ($33 million) and Texas Instruments ($524 million), Ocwen Financial Corp. and Bankruptcy Management Solutions Inc. More large companies are expected to do the same.

Companies and large investors that still continue to hold auction rate securities without taking action should appreciate that they are exposed to potentially significant losses in the long run. These investors should carefully weigh the pros and cons of disposing of their auction rate securities in the secondary market for less than face value, and seeking legal redress for the difference in value. As painful as it is to realize a partial loss, it is wise to consider steps that may prevent a total and permanent loss.

J. Boyd Page, a senior partner of Page Perry, observed that, “I know that many investors are reluctant to realize losses and hope that things will get better, but these investors also need to appreciate that things could get a lot worse. Furthermore, investors who have viable legal claims risk losing those claims if they wait too long.”

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and corporate investors in auction rate securities cases. For further information, please contact us.