Auction Rate Securities

Auction Rate Securities
Securities fraud investigations have started about the alleged securities fraud associalted with the sale of Auction Rate Securites (ARS) by financial broker dealers in the banking industry. The preferred auction rate securities certificates were being promoted as being "liquid like water", "As safe as cash" and a "cash equivalent".

When, for reasons yet to be determined, the securities auction market for ARS went bust, the major broker dealers said they were not going to purchase any more ARS for themselves which would have kept the auctions from failing. Since they did, that meant that the securities were no longer liquid and could not be sold. Nationwide thousands of securities auctions held by broker-dealers have now failed.What this means is that $300 billion in Auction Rate Securities that were once hyped as cash equivalents are something like a Tar Baby from which investors cannot extract their money. This has resulted in huge financial losses and caused severe headaches for hundreds of investors.