Thursday, April 10, 2008
Auction Rate Securities Litigation
Auction Rate Securities Litigation: What You Should Know
DANVILLE, Calif., April 7, 2008 -- Auction Rate Securities (ARS) are long term, variable rate bonds tied to short term interest rates. The rate is typically established through a Dutch Auction or remarketing process which is conducted by the auction or remarketing agent (typically a large broker-dealer or bank). ARS are issued by a wide range of entities, including municipalities, corporations, and closed-end funds.
Investigations are currently in progress regarding alleged securities fraud in connection with the sale of Auction Rate Securites (ARS) by a number of major broker-dealers, including UBS, Citigroup/Smith Barney, Wachovia, Merrill Lynch, Wells Fargo, Morgan Stanley, J.P. Morgan Chase and TD Ameritrade, among others. The issuers of the ARS include Blackrock, Eaton Vance, Nuveen, Legg Mason and ING.
According to recent news articles, the broker-dealers and issuers materially misrepresented the liquidity and risks of the ARS to individual investors and corporations by labeling these securities as "cash equivalents," in press releases, monthly account statements, individual communications with investors, and other investment guidance material. In fact, the promised liquidity of ARS was created artificially when the broker-dealers purchased their own securities in order to keep the market running smoothly.
Beginning on February 7, 2008, the market for ARS collapsed, as all of the major broker-dealers announced that they will no longer purchase ARS for their own accounts to ensure that the auctions do not fail and that the securities remain liquid. In the past month, thousands of auctions run by the broker-dealers have failed. As a result, over $350 billion in ARS that were once offered as "cash equivalents" are now illiquid, resulting in economic losses and severe hardships for investors. Some broker-dealers, including UBS and Goldman Sachs Group, have been sending investors brokerage statements noting that the ARS have been marked down in value.
Beginning in March 2008, several class action lawsuits have been filed against many of the participating banks.
If you are an investor who has purchased or owns Action Rate Securities, and you either have information or wish to discuss your rights as an investor, please contact Carey & Danis now! Toll Free: (800)721-2519.
SOURCE Carey & Danis, LLC
