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Auction Rate Securities, ARS Fraud Lawyer

In the beginning of 2008, the entire $300 billion Auction Rate Security (“ARS”) market collapsed. Individual investors were told by their financial advisers they couldn’t access their funds. ARS had been marketed as a 100% safe and 100% liquid place for investors to park their cash. Instead, investors were left with illiquid securities, many of which are no longer worth par value.

ARS are long-term bonds that act like short-term debt. They can be municipal bonds, student loan bonds, or preferred shares in closed-end mutual funds. These securities were traded via a Dutch auction, usually every seven (7) days.

Banks and financial advisors misrepresented ARS as safe, liquid, short term “cash equivalents.” They were listed on account statements as “cash.” Because ARS are sold on a secondary market, most investors never received a prospectus for these securities. In sum, virtually all of the investors Williams Hart has spoken with had no idea these securities had any illiquidity risk. Indeed, most investors specifically instructed their financial advisors to pick an investment that was safe and liquid.

In February of 2008 the various banks and brokerage firms decided to withdraw their support for the auctions, and the result was the immediate collapse of the entire ARS market. The brokerage firms knew if they withdrew their support the auctions would fail and their clients would be harmed, but they issued no warning.

Now that this has come to light, many people are demanding answers from the banks and investment firms that issued the auction-rate securities. There are now investigations into securities fraud concerning the misrepresentation of the auction-rate securities. The Attorney General of Massachussets has filed a civil claim against UBS, and this claim includes allegations and evidence that UBS was aware of the distressed condition of the ARS market well before the February 2008 market collapse.

Williams Hart and Houston-based Shepherd Smith Edwards & Kantas have created an alliance to pursue individual claims for ARS investors against their brokerage firms. To date we have spoken to well over $1 billion of ARS clients, and are actively pursuing individual FINRA arbitration claims against all responsible parties.

If you have been unable to liquidate your auction-rate bonds and preferred stocks and feel that your investments were misrepresented by an investment firm, contact the auction rate securities fraud lawyers of Williams Hart at (800) 220-9341 to discuss the details of your case and to determine your legal options.

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