AUCTION-RATE SECURITIES

IS YOUR MONEY FROZEN BY YOUR BROKERAGE FIRM?

We are investigating courses of action for investors in claims involving fraud and breaches of fiduciary duty for losses sustained in the ARS market collapse.  Contact the securities attorneys at SNSFE today to discuss your options if you invested in Auction-Rate Securities and cannot access your money. These losses may be recoverable.  You can reach Jim Eccleston, head of SNSFE's securities department, at JEccleston@snsfe-law.com  or 312.621.4400. 

EXCERPT OF THE SEC'S FINDINGS AGAINST BROKERAGE FIRMS INVOLVED IN THE AUCTION-RATE SECURITIES MARKET COLLAPSE:

"The SEC order finds that, between January 2003 and June 2004, each firm engaged in one or more practices that were not adequately disclosed to investors, which constituted violations of the securities laws. The violative conduct included:

• allowing customers to place open or market orders in auctions;
• intervening in auctions by bidding for a firm's proprietary account or asking customers to make or change orders in order to prevent failed auctions, to set a "market" rate, or to prevent all-hold auctions;
• submitting or changing orders, or allowing customers to submit or change orders, after auction deadlines;
• not requiring certain customers to purchase partially-filled orders even though the orders were supposed to be irrevocable;
• having an express or tacit understanding to provide certain customers with higher returns than the auction clearing rate; and
• providing certain customers with information that gave them an advantage over other customers in determining what rate to bid.

Some of these practices had the effect of favoring certain customers over others, and some had the effect of favoring the issuer of the securities over customers, or vice versa. In addition, since the firms were under no obligation to guarantee against a failed auction, investors may not have been aware of the liquidity and credit risks associated with certain securities. By engaging in these practices, the firms violated Section 17(a)(2) of the Securities Act of 1933, which prohibits material misstatements and omissions in any offer or sale of securities.

The SEC order (1) censures each firm; (2) requires each firm to cease and desist from committing or causing any violations and future violations of Section 17(a)(2) of the Securities Act; (3) requires each firm to pay a penalty; (4) requires each firm to provide certain disclosures of its material and current auction practices and procedures; and (5) requires each firm, not later than six months after the date of the order, to have its CEO or general counsel certify that it has implemented procedures that are reasonably designed to prevent and detect violations in the auction rate securities area.

The order requires the respondents to pay the following penalties based upon their relative market share and conduct: Bear, Stearns & Co., Inc., Citigroup Global Markets, Inc., Goldman Sachs & Co., J.P. Morgan Securities, Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated/ Morgan Stanley DW Inc., and RBC Dain Rauscher Inc. - $1,500,000 each; and A.G. Edwards & Sons, Inc., Morgan Keegan & Company, Inc., Piper Jaffray & Co., SunTrust Capital Markets Inc., and Wachovia Capital Markets, LLC - $125,000 each. Banc of America Securities LLC is required to pay $750,000 rather than $1,500,000 based on the quality of its self-monitoring capabilities in the auction rate securities area.”

Source:  SEC Press Release

Relevant articles/posts/podcasts:

UBS Schemed To Defraud Unsuspecting Investors So As To Unload Its Auction-Rate Securities Inventory, According To Complaint Filed By Massachusetts Securities Regulator

Documents Show UBS Knew About Risks Of Auction-Rate Securities But Cautioned Only Some Of Its Clients As Other Clients Purchased Auction-Rate Securities

Auction-Rate Securities Failures Due In Part To Lack Of Disclosure That Financial Services Firms Sometimes Have Had To Intervene In Auctions Just To Prop Up Auctions According To SEC Official

More Bad News For Auction-Rate Securities Market

J.P. Morgan Analyst Paints Bleak Picture For Investors In Student Loan Auction-Rate Securities

300 Companies Struggling Over Auction-Rate Securities With One-Half Of Them So Far Reporting Losses Totaling $1.8 Billion

Investors Beware As Bank Of America And RBC Dain Rauscher Added To The List Of Firms Sued In Class Actions Over Auction-Rate Securities

Plug Power Sues UBS As Auction-Rate Securities Woes, Failed Auctions And Big Discounts On Redemptions Continue

Investor Angst, Regulatory Probes And Litigation Intensify Over Auction-Rate Securities

Regulators' Inquiries As Well As Auction-Rate Fire-Sale Discounts Increase Amid Renewed Allegations Of Collusion, Especially In the Area Of Student Loan Auction-Rates

SNSFE Announces Intention To Maintain Library Of Auction-Rate Securities Materials As SEC And State Securities Regulators Continue To Investigate Possible Investor Abuse

Regulators Increase Investigations Of Auction-Rate Securities As Individual Investors Might Have Been Suckered Into Buying So That Heavyweights Could Bail Out

ARS Woes Continue As Companies Join In Lawsuits To Recover Damages And Liquidate Securities

Auction-Rate Securities Present A "Hotel California" Nightmare For Investors

SNSFE Investigating Complaints Regarding Auction-Rate Securities, Liquidity Concerns, And Inappropriate Margin Loans

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Please visit our websites at snsfe-law.com and financialcounsel.com.

Shaheen, Novoselsky, Staat, Filipowski & Eccleston, P.C. | 20 N. Wacker Drive, Suite 2900  |  Chicago, IL  60606-9719  |  Tel 312.621.4400  |  Fax 312.621.0268