Individuals Urged to Buy Auction-Rate Securities as Wall Street Fled Market
Were big Wall Street firms bailed out of the auction-rate securities market on the backs of individual investors? That’s the question raised in an article that appeared in the New York Times on April 13.
In mid-February, the auctions for the investment instruments failed. That meant investors were unable to sell their securities. To this day, auction-rate securities investors find themselves owning frozen assets.
Thomas Martin, the head of the consumer protection advocacy group America’s Watchdog, told NYT’s reporter Gretchen Morgenson:
“The majority of people have $200,000 to $300,000 invested, but it’s their life savings, and they were told this was the same as a money market or C.D. I must have 50 or 60 people that were buying houses that were supposed to close in March and their earnest money is at risk of forfeiture because they relied on the liquidity in these things.”
According to the article titled “It’s a Long, Cold, Cashless Siege,” many individual investors claim their brokers advised them to buy the instruments for the first time during the second half of 2007. At the same time, big companies were ditching their shares.
“As big holders of these securities accelerated their selling late last year, Wall Street firms overseeing the auctions would have come under greater pressure to find buyers to make auctions succeed. It is unclear whether they turned to individual clients to fill this void.”
If you hold auction-rate securities, contact Carey & Danis.
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