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Auction Rate Securities |
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Auction Rate Securities Collapse
During the week of February 11, 2008, the nation’s leading financial institutions abruptly ended their role in supporting the Auction Rate Securities market, causing the market to collapse.As a direct result, investors are now left holding approximately $330 billion in illiquid securities that were marketed and sold to them as “cash equivalents.”Crosby & Higgins LLP has quickly become one of the leading firms in the nation proactively enforcing the rights of investors with respect to the collapse of the Auction Rate Securities market and has filed multiple arbitration claims with the Financial Industry Regulatory Authority (“FINRA” formerly NASD) seeking millions in damages, as well as rescission and attorneys’ fees.The following is a brief overview of the Auction Rate Securities market and the claims that investors are beginning to pursue in the aftermath of the market collapse. Click here to read the full article |
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ARS Settlement Summaries
Please click on the institution for a detailed profile |
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Institution |
Status |
Eligible Investors |
Details |
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Oppenheimer |
Under Investigation |
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Refusing to settle |
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RBC Capital |
Agreement pending |
Individual accounts less than $10 million; non-profit accounts less than $25 million; all investors to be redeemed by the end of 2009 |
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Lehman Brothers |
Under Investigation |
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$9.74 billion outstanding; filed for bankruptcy protection; some ARPS were issued by Lehman's asset management arm-Neuberger Berman- which remains solvent |
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Charles Schwab |
Under Investigation |
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Refusing to settle; providing limited liquidity mechanisms to investors
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E* Trade |
Under Investigation |
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TD Ameritrade |
Under Investigation |
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$1.2 billion outstanding; refusing to settle |
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Wells Fargo |
Under Investigation |
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Wells Fargo has not agreed to a global settlement. Generally, Wells Fargo is offering non-recourse loans for up to 90% of par value of a customer's ARS holdings. |
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Fidelity Investments |
Agreement Pending |
Self-directed accounts, customers must request redemption prior to Dec. 11, 2008. |
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UBS |
Settlement Finalized |
Individuals, nonprofits, and accounts less than $1 million starting Oct. |
$18.6 billion buyback; $150 million fine; approximately $31 billion outstanding |
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Settlement Finalized |
Individuals, nonprofits, and small business accounts starting Nov. |
$9 billion buyback; $50 million fine
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Citigroup |
Settlement Finalized |
Individuals, nonprofits, small business Nov. 2008; institutional investors 2010 |
$7.5 billion buyback; $100 million fine; approximately $40 billion outstanding |
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Merrill Lynch |
Agreement Pending |
Individuals, nonprofits, and business accounts starting Oct. less than $4 million; starting Jan. 2009 less than $10 million |
$7 billion buyback; $125 million fine; approximately $12 billion outstanding |
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Morgan Stanley |
Agreement Pending |
Individuals, nonprofits, and small business less than $10 million (some exceptions) |
$4.5 billion buyback; $35 million fine; approximately $20 billion outstanding |
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Agreement Pending |
Individuals,nonprofits, business accounts less than $10 million; completed by Nov. 2008 |
$3 billion buyback; $25 million fine; approximately $27 billion outstanding |
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Goldman Sachs |
Agreement Pending |
Individuals, nonprofits, small business accounts |
$1.5 billion buyback; $22.5 million fine; approximately 17.8 billion outstanding |
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Deutsche Bank |
Agreement Pending |
Individuals, nonprofits, small business accounts within 90 days of final settlement |
$1 billion buyback; $15 million fine |
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Bank of America |
Agreement Pending |
Individuals, nonprofits less than $25 million, small business less than $10 million starting Oct. and completed by Jan. 2009 |
$4.5 billion buyback; $11 million outstanding |
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Credit Suisse |
Agreement Pending |
Accounts less than $10 million |
$550 million buyback; $15 million fine |
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SunTrust/ Comercia/First Southwest/ WaMu |
Agreement Pending |
Accounts less than $10 million within 60 days of settlement |
$1.8 billion buyback; $3.25 million fine |
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Completed |
Repurchased all outstanding ARS by Jul. 2008 |
$0 outstanding | |
Helpful Guides For Investors
Auction Rate Securities Update: Winter 2010
The collapse of the auction rate securities market and the resulting freeze of more than $330 billion dollars in investor capital in February 2008 foretold of the catastrophic global financial meltdown that would follow just a few months later. Indeed, even as major financial institutions, some of which have since disappeared, were negotiating regulatory settlements to begin redeeming action rate securities held by certain customers, the basic ability of many of these institutions to survive was quickly unraveling. Now, two full years after the market collapse, over $100 billion dollars in auction rate securities held by institutional, corporate, high net worth, “downstream” and other individual investors remains frozen, with little prospect of liquidity anytime soon, at least not without substantial loss of principal...More
In response to the building pressure exerted by both regulators and pending claims, on August 7, 2008, Citibank proposed that it would redeem approximately $7.5 billion of auction rate securities from individual investors, small businesses, and charities and also use its best efforts to liquidate the approximately $12 billion worth...More
Securities Arbitration: A Primer
The securities industry has long favored arbitration as the preferred method of dispute resolution.It has been standard practice in the securities industry for many years now for brokerage firms to mandate the use of the arbitration process to resolve investor disputes...More
An Introduction to Auction Rate Securities
Auction rate securities refer to a type of debt security with nominally long-term maturities (as long as fifty years) and variable coupon rates.Periodic Dutch auctions are held by the underwriting financial institution, usually every seven to thirty-five days, to set the coupon rate for each period and allow...More
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Crosby Higgins LLP, 350 Broadway, Suite 300 New York, NY 10013 | Tel: 877-5-BIZLAW or (646) 452-2300 Fax: (646) 452-2301 |
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