Many Auction Rate Securities Investors Remain Left Out in the Cold


$130 billion of retail and institutional investor money is still being held in auction rate securities over two years after the $330 billion auction rate market failed and froze, according to Daisy Maxey in her Wall Street Journal article, “Still Frozen After All These Years.” But just as the Paul Simon song modulates from gloom into glee at the line, “But I would not be convicted by a jury of my peers’,” there may be a way out for ARS holders who are ineligible for the buy-backs some firms have agreed to as a result of their settlements with regulators.

Investors may wish to sell to a secondary market buyer for a substantial fraction of par value (70% to 90%, according to the article) and file an arbitration claim with the Financial Industry Regulatory Authority for the difference. Investors who can prove “consequential damages” ? for example, lost opportunities as a result of being unable to access their money ? can claim those as well. Those investors who need access to or use of their frozen funds have been successful in recouping damages in many cases.

Investors who do not need access to their money now, and/or who are receiving an acceptable return, may just choose to wait and see what happens.

Investors with questions along those lines may wish to see our July 21, 2008 blog entitled, “Should Investors Sell Their Illiquid Auction Rate Securities?”

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 have extensive experience in representing investors in auction rate securities cases. For further information, please contact us.