Many investors who were told they could safely place their money in an Auction Rate Security (ARS) with the assurance the investment would be liquid. However, recent turmoil in the credit markets has created a living nightmare for those in need of their cash.
Practically every major bank and investment firm marketed these products to their clients as a safe alternative to money markets, even certificates of deposit. Now, as the auctions have failed, many investors wonder if they will ever recover their principal, even as they still receive the periodic interest payments.
How do you know if your investment is likely to be wiped out? Depending on the firm and the underlying investment(s) in the ARS, you may have a devistating financial crisis or an annoying short-term loss of the use of your money. The underlying investment often holds the key to which situation you face. Many ARS’s have AAA rated or government guaranteed investments within the security. Others are backed by problem loan portfolios or defaulting bond holdings. How the security is priced on your statement is also indicative of the severity of your problem. The information (or lack thereof) you are receiving from your bank or brokerage can also be telling.
Our firm is actively working with ARS holders to determine the nature of their investment and the options available for recovering their frozen assets. Contact us today for a free consultation.