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Auction Rate Securities Fraud Lawyers

The lawyers and attorneys at our firm are offering free consultations to investors who lost money as the result of purchasing auction rate securities. The securities fraud lawyers at our firm are currently investigating claims that brokers and other sellers of auction rate securities over-stated the safety and liquidity of these investment vehicles. We are also investigating possible manipulation of the auction rate securities market.

Auction rate securities are long-term corporate bonds, municipal bonds and preferred stock on which the interest rates are reset periodically based on bids submitted during auctions through securities firms. Generally, rates are reset every  seven, 14, 28 or 35 days. In early 2008, auctions of these securities failed due to concerns that bond insurers guaranteeing many of the $330 billion in outstanding auction rate securities would be downgraded.

Adding to an already bad situation, brokers such as Goldman Sachs Group Inc. and Citigroup Inc. purposely permitted the auctions for preferred securities, which were not insured, to fail by not committing their own capital to sales when there were not enough bidders.   As a result, the market for auction rate securities vanished overnight leaving a lot of small investors holding auction rate securities they once thought were safe vehicles with no way to sell them.

While investors were caught off guard by the meltdown of the auction rate securities market, it appears that investment banks and brokers were not. In fact, the accounting firm of PricewaterhouseCoopers was questioning the investment banks’ claims that the vehicles were cash equivalents as early as 2005.  According to an article published on, a note from one of the firm’s opinions said, “The legal maturity of auction rate securities is 20 to 30 years and, as such, the securities ordinarily should not be classified as cash equivalents, but rather as investments.”   The information was part of the accounting firm’s reference materials available to clients on the firm’s Web site.

PricewaterhouseCoopers based its opinion on a  Financial Accounting Standards Board  (FASB) statement which says that an investment vehicle cannot be considered a cash equivalent unless it has a maturity less than three months. Many auction rate securities have maturities going out 20 to 30 years. Unfortunately, neither the banks nor regulators did anything about the concerns raised by PricewaterhouseCoopers.  In fact, according to, the banks lobbied the FASB against the firm’s opinion, and accused PricewaterhouseCoopers of disrupting the market.

Various state and federal agencies have been investigating the auction rate securities crash, amid suspicions that investment banks misled their clients about both the liquidity of the vehicles and safety of the market.  Many institutions, including UBS AG, Citigroup Inc., J.P. Morgan Chase & Co., Morgan Stanley, Merrill Lynch & Co. Citigroup, and Wachovia Corp., have reached agreements with regulators to buy back billions of dollars in auction rate securities from their clients.

Legal Help for Victims of Auction Rate Securities Fraud

If you or someone you know purchased auction rate securities and suffered financial losses because of the market meltdown, you have valuable legal rights. Please contact one of the auction rat securities fraud lawyers at our firm by filling out our online form or calling 1-800-LAW INFO (1-800-529-4636).

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