Auction Rate Securities Lawyer

In the beginning of 2008, the market was not performing well. To top that off, numerous broker-dealers pulled their money from the auction rate securities market. This caused the entire market, valued at over $350 billion, to collapse. By the beginning of March 2008, only one issuer had announced plans to buy back the auction-rate debt.

While markets do sometimes collapse due to the business cycle, individual investors in this instance were told they couldn't access their funds. This caused them to worry that they would not be able to recover their investments.

Auction Rate Securities

Auction rate securities are long-term bonds that act like short-term debt. They can be municipal bonds, corporate bonds, and preferred stocks that can be issued by municipalities (cities, towns, or other districts possessing corporate existence and usually their own local government), tax-exempt institutions, and closed-end mutual funds.

The interest rate on auction rate securities is also periodically reset via Dutch auctions. These are auctions where the auctioneer starts with a high asking price which is lowered until someone buys in.

The Problem

While auction rate securities are not illegal, investment firms misrepresented them to investors as safe, liquid, short-term -cash equivalents- that were like money market firms. In addition, they were frequently sold to investors even if an auction rate security did not meet the investment objectives of the individual investor.

In addition to misrepresenting the auction rate securities as safe, they were represented as liquid. The thing to note on auction rate securities is that they are only liquid as long as the market is alive. When the market died, the auction rate securities became illiquid.

If you have been mislead by an investment firm concerning auction rate securities, contact the auction rate securities fraud attorneys of Williams Kherkher at 866.950.9000 to discuss your situation and to determine your legal options.