Miami Auction Rate Securities

The collapse of the $300 billion auction rate securities (ARS) market has left many Miami investors without access to the money they thought was invested in safe-as-cash stocks and bonds. Still feeling the aftereffects of the credit crunch and mortgage loan crisis, dozens of broker-dealers responsible for running ARS auctions abruptly pulled out from the auction rate securities market, setting off a chain reaction of failed auctions which brought the entire market to a virtual standstill.

Investors reacted to the troubled market quickly; many sought to take advantage of the advertised liquidity of Miami auction rate securities to retrieve their invested funds. They quickly discovered that, with over 95% of all student-loan-backed ARS auctions failing, liquidity was all but nonexistent, and trading out of the market all but impossible.

Investment Firms and Miami Auction Rate Securities Sales

In years past, Miami auction rate securities were marketed to both issuers and investors as a unique, attractive debt instrument. Because of their fluctuating interest rate, auction rate securities allowed issuers to treat their long term financial obligations as short term debt. On the other hand, the short intervals between ARS auctions allowed both bondholders and buyers to take advantage of the apparent liquidity of the market.

Investment firms across the country were keen to capitalize on the flourishing Miami auction rate securities market. To boost sales, they launched aggressive campaigns to sell ARS shares to investors – even when auction rate securities did not fit into an investor's financial goals.

As part of the firms' strategy, they strongly emphasized the benefits of a Miami auction rate investment, touting the safety and liquidity of the ARS market, while downplaying – or entirely omitting – information about the possible risks.

Broker-Dealers and the Miami ARS Market Collapse

Thanks in part to the efforts of investment firms, many ARS investors were unaware of just how large a role broker-dealers played in the Miami auction rate securities market. In addition to running periodic ARS auctions to reset interest rates, broker-dealers also acted as major players in their own auctions, bidding to ensure that a clearing rate could be determined.

The February 2008 collapse of the Miami auction rate securities market demonstrated just how dependent ARS auctions were on the whims of broker-dealers. After broker-dealers pulled out of the market, hundreds of auctions failed in the first week alone. Investors attempting to flee the crisis found themselves trapped in the once-liquid market, locked in by the lack of successful auctions.

Taking Action against Auction Rate Securities Fraud

As a Miami investor, your right to be adequately informed about the investments you make may have been violated by the over-aggressive strategies of investment firms. Taking legal action against the fraudulent actions of these firms may be the only way to force them to accept responsibility. To learn more, contact an auction rate securities lawyers today by calling 800.220.9341.