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Auction Rate Security Anxiety Continues

Posted by Larry Doyle on December 29, 2009 10:03 AM |

Still they wait.

$150 billion dollars.

Thousands of investors unable to access THEIR funds frozen in Wall Street’s greatest fraud, that is the world of auction-rate securities.

While an initial court ruling against Union Bank of Switzerland defined the sales and distribution of auction-rate securities as a fraud, recent court rulings have shifted the burden of responsibility onto investors.

When I worked on Wall Street, I was never involved directly or indirectly with the sales or trading of auction-rate securities. That said, I understand full well the explicit and implicit guarantees that brokers and salespeople made in distributing this product. The fact that those entities which distributed ARS have not been held to full and total account is an unspeakable travesty. The lives of investors who have been dramatically impacted get little to no attention from the media. Shame on them.

Our federal financial regulators housed within the SEC are nowhere to be found. FINRA remains in bed with the industry and would just as soon not draw attention to its own liquidation of $647 million ARS in mid-2007 as the market was failing.

Days, weeks, months, and now years pass. Where is the justice and retribution for those ARS investors still frozen and unable to access that $150 BILLION!!!

Ponder that figure for a second and put it in the context of all the other frauds, scams, and government programs. These investors should be paid first. It’s their money that the industry is using to replenish their own coffers and pay their own bonuses. This injustice is not America.

Having crossed paths with dozens of ARS investors over the course of the past year, the one entity that distributed ARS which seems to evoke the greatest outrage is Oppenheimer Holdings (not to be confused with Oppenheimer Funds, a division of MassMutual). Time and again, I have heard from investors who have been lambasted by Oppenheimer representatives for continuing to call looking for retribution.

Did Oppenheimer’s CEO Albert Loewenthal and other senior Oppenheimer executives dump their own personal ARS holdings as the market imploded? If so, do those transactions rise to the level of insider trading? Isn’t this the same question that still needs to be answered in regard to FINRA? Yes, these questions need answers.

Oppenheimer Holdings, and every other entity which distributed ARS, should be mandated to put their ARS investors first in line to receive their money. The investors should also be entitled to a return with interest.

To say that this market is too big or the size of the problem too great is to give cover to a fraud. A fraud once perpetrated and not properly uncovered and addressed will only serve to embolden others who would dare down this road in the future.

America is supposed to be better than this.

Force Albert Loewenthal to take the stand, release his personal financial records and files regarding ARS, and let’s take our country back.

Comments, color, constructive criticism always appreciated.


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