Brokerages and Banks Handcuff Auction-Rate Securities Investors
Banks and brokerages that sold auction-rate securities are now thwarting attempts by investors to unload the instruments, Bloomberg News reports.
In “Banks Say Auction-Rate Investors Can’t Have Money,” reporter Darrell Preston writes that some investors who are holding the frozen auction-rate securities have found buyers on the secondary market. The buyers are willing to purchase the instruments at a discount. But when investors try to have the securities transferred, the banks and brokerages are balking.
That’s what happened to Franklin Biddar, 65. He agreed to sell $100,000 worth of auction-rate securities for an 11 percent loss. When he asked Bank of America to make the transfer, it refused to release the bonds.
Biddar told Bloomberg News: “Bank of America got me into these securities that are supposed to be as safe as a money market, and now they won’t get me out.”
Bank of America told Biddar it was acting in his best interest. But the only interest Bank of America is protecting is its own.
By handcuffing the investors to frozen securities, the brokers and dealers believe they can contain the amount of damages investors may recover in the class action lawsuits filed against them.
Not only will the strategy fail, it raises troubling questions about whether dealers are breaching the duties they owe to their clients.
On May 8, Carey & Danis filed a class action lawsuit in the U.S. District Court for the Southern District of New York on behalf of persons who purchased auction rate securities from UBS AG (NYSE: UBS), UBS Securities LLC and UBS Financial Services Inc. between May 8, 2003 and Feb. 13, 2008 and who continued to hold the securities as of Feb. 13, 2008.
Auction-rate securities investors who wish to discuss their rights against any broker-dealer may contact Carey & Danis toll-free at 800-721-2519 or fill out our online contact form
