Auction Rate Securities

Auction Rate Securities/ Auction Rate Preferred Securities

Auction Rate Securities and Auction Rate Preferred Securities (ARS/ARPS) are sometimes also referred to as Auction Market Preferred Stock.

For many years these investments, sold by nearly all of the major brokerage firms, were marketed as being risk free, cash equivalent and an alternative to money market funds. In February of 2008, with over $300 billion in auction-rate securities outstanding, the market ceased functioning and investors were left holding an illiquid long term investment.

Some of the large underwriters are marking down the value of the auction rate securities on monthly statements. Other firms are still carrying the investments at the original value notwithstanding the fact that the investment is now illiquid. Some of the firms are offering to make loans against the auction rate securities with a typical limit of 50% of the value of the securities. Presently the future of the auction rate market is uncertain.

What Can I Do if I Invested in Auction Rate Securities?

If you invested funds that were earmarked for a specific use and needed at a specific time in auction rate securities it may be possible to force the broker dealer to purchase the securities back from you. We recently negotiated the repurchase of several million dollars worth of auction rate securities for a client who had raised these funds to be used to workout some real estate loans. He invested the money in the ARPS to earn interest for a few weeks until the funds would be needed, but when the auction rate market failed in early February 2008, our client faced losing several parcels of real estate. The broker dealer decided to take the securities back rather than face the action which our client would have filed for the substantial loss he would have suffered had he not been able to make the payment due on his real estate loans.

If you suffered losses from investments in auction rate securities, you may be able to recover your investment. Give us a call at 561-391-1900 or e-mail us with the details of your case for a free consultation.

For more information please visit