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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.


  • Jed Kline

    The comments about Oppenheimer are spot on. What this company has done to its now former ARPS clients is unspeakable. If you’re a potential Oppenheimer client reading this, run – don’t walk – away from the firm. If thnigs go South they don’t give a damn about you. There are other firms who are concerned about the well being of their clients. Oppenheimer exployees are just out to line their own pockets.

    • Larry Doyle


      Thanks for this color. It is remarkably consistent with that I have heard from a number of other Oppenheimer customers.

      If any other ARS investors in general or Oppenheimer customers specifically have thoughts to share or feedback that may be of use for others, please do not hesitate to chime in. Thanks.

  • goes dito for E*Trade, they and Schwab and Oppen. are the bottom turds in the septic tank, they have to be real happy with themselves, they will get it back 10 fold in every negative way that exists.
    no shame

    E*trade is pure dirt

  • Dear Larry,
    I cannot begin to thank you enough for continuing to express outrage in this matter. Happy New Year.

    The financial media ignores the story on a major level, no help from politicians either.
    Firms like E*Trade Oppen, and Schwab need to be called out and shamed.

    My expierence with E*Trade has been horrible, they hang up on me, ignore the problem, deny any responsibility, insult me, lie. In the beginning in March 2008 I suspect I even got mid-night threathening phone calls from the broker I charged with soliciting these things to me, who lied all over the board, and ran from responsibility.

  • Kathy

    Larry, I also thank you for continuing to shine a light on this staggeringly huge fraud. How banks have gotten away with this is beyond me. No, wait, I understand: the regulatory agencies have sat on their hands throughout.

    I hope next year you’ll write about the funds as well — Pimco, Blackrock, Van Kampen — that refuse to refinance these rotten securities that were fraudulently marketed.

    • Larry Doyle


      I am happy to provide a forum that exposes fraud and promotes truth, transparency,and integrity whenever and wherever possible. To the extent that you and/or other ARS investors can provide info (as you have throughout 2009) then I hope our efforts can bear real fruit in 2010. Thanks again for your support.

      • E*Trade Securities was puuting out this bait as late as Nov 2007 to help promulgate ARPS and consequently dump on their “clients.”


        Rob Slaymaker, Chief Executive Officer of BondDesk Group, remarked, “We are delighted to make it possible for E*TRADE retail customers to trade Auction Rate Securities through an E*TRADE Financial Advisor. We look forward to working with E*TRADE Securities in offering the sale of these popular investment vehicles to retail investors. The ARS market continues to experience tremendous growth and our electronic trading platform will further fulfill accelerated supply and demand for this currently under-serviced asset class.”

        BondDesk will offer the following ARS asset classes: Taxable Preferred, Taxable Debt, Tax-exempt Preferred, Tax-Exempt Debt and Dividend Received Deductions (DRD) Preferred. And through the BondDesk Alternative Trading System (ATS), E*TRADE customers can view daily ARS auctions and offerings, historical reset rates, future reset dates, multi-sourced descriptive data from leading auction agents (e.g., Deutsche Bank, BONY), ARS dealers and third-party trading systems.

        This is an actaully email I got from them to help pull off their deception.

    • anonymous

      It is odd that the Fed and the Treasury will buy other assets but not ARS, even those that are AAA rated languish. This would provide liquidity to the marketplace w/o risk to the taxpayer. Much like Gemany in the early 30s bailouts are used for those that are politically connected and individual retail clients are not.

  • copy of an email from E*trade in 2007, and they say they knew nothing, actually they dont

    October 06, 2007

    BondDesk Offers E*TRADE Easier Access to Auction Rate Securities

        BondDesk Group, a leading odd-lot fixed-income electronic trading platform and provider of software solutions to the securities industry, recently announced it will begin trading Auction Rate Securities (ARS) through their Alternative Trading System (ATS). E*TRADE Securities LLC will be the first financial services firm to offer electronically traded ARS to retail investors via the BondDesk marketplace.
       Auction Rate Securities have attracted the attention of investors because they are short-term instruments that generally produce higher rates of return than traditional money market investments. With BondDesk’s straight-through processing, ARS market participants can buy and sell at auction or in the secondary markets. Auction orders are processed quickly and efficiently; thereby saving time and reducing paperwork.
       E*TRADE customers will easily be able to access Auction Rate Securities through E*TRADE Financial Advisors. According to Thomson Financial, Auction Rate Securities is a $260 billion market, which includes Auction Rate Preferred Securities (ARPS) and Municipal Auction Rate Securities (MARS).
       According to Rob Slaymaker, chief executive officer of BondDesk Group, “The ARS market continues to experience tremendous growth, and our electronic trading platform will further fulfill accelerated supply and demand for this currently under-serviced asset class.”

    • Barbara


      I too am in the same ARP’s dilemma with E*TRADE. I have close to 500M in ARP’s purchases that were recommended by ET. My financial advisor clearly stated that I could have my principal back at any time with 7 days notice. They misrepresented that these were safe securities. E*TRADE has completely avoided any responsibility for these misrepresentations. They haven’t redeemed any of my ARP’s and they have been M.I.A. in terms of communicating with their clients as to how they plan to make their clients whole. As clients, we have been left holding the bag with our future life savings at extreme risk. E*TRADE itself is doing so poorly that I fear that our ARP’s positions are in further jeopardy should ET go bankrupt. I am absolutely incredulous that the securities regulators are allowing this gross injustice to continue. I am not keen on selling on the secondary market as I would have to sell at a steep discount and lose my shirt financially.

      • LD

        I wish there were never a reason for you to have to write that message but please know that Sense on Cents is trying to elevate the failure and what I believe to be the conflict of interest within FINRA in regard to ARS.

        Thanks for adding to the dialogue.

      • John Wallace

        Did you contact an attorney, and contact the PA, and especially the CO attorney generals offices. They are showing some interest in going after E*Trade.. more evidence always welcome, it will help us all.

        • Barbara

          Hi John,

          Yes, I contacted an attorney but the price he quoted is steep and he is not willing to do it on contingency. There are some extenuating circumstances that would additionally make my case more problematic. I’d be looking at approx. $75k or more in expenses to hire this lawyer.

          I additionally contacted Attorney General Cuomo’s office and the following was their response.

          State of New York
          Office of the Attorney General

          December 11, 2009

          Thank you for your communication with the Investor Protection Bureau of Attorney General Andrew Cuomo’s office.

          Please note that this letter merely acknowledges your correspondence. Because of the volume of such correspondence, the Bureau is unable to act on every matter brought to its attention.

          We appreciate your willingness to provide information and to share your concerns.

          Very truly yours,
          James Gallo
          Legal Assistant

          In spite of the blow off response above, Andrew Cuomo has been leading the charge against these brokerages for their ARP’s fraud. He’s been quite successful.

          I am absolutely livid over this entire situation. ET knows “exactly” how these ARPs were sold to us. They tape every conversation between their clients and their financial advisors so it’s “on record”. I know… I used to work there. (sorry to say)

          I’m currently stuck with Pimco, Blackrock and Van Kampen. Pimco and Blackrock are the worst offenders. They haven’t had any redemptions (or at least on the particular ARP’s that I own)


          • John Wallace


            You might try this attorney:


            This is <> for him, I did a lot of research on attorneys, and he was the most resonable, and has the best handle on E*trud

            Also, even if you don’t live in Colorado, contact the Colo Attorney Generals office, as they seem to be picking up where Penn. leaves off.


            keep calling her.

            Carolyn W. Mendelson, Counsel
            Pennsylvania Securities Commission
            Division of Enforcement, Litigation and Compliance
            806 State Office Building
            300 Liberty Avenue
            Pittsburgh, PA 15222-1210
            Front Desk: (412) 565-5083
            Direct Dial: (412) 565-7519

            Thank you for your note. Pennsylvania on behalf of the NASAA Taskforce continues to investigate E*Trade.

            IMO E*trade is nothing but 3 steps below pond scum alright, and I am only stuck with $50,000.00 and they still dig in their heels like a Mexican mule. I was fortunate to have been redeemed via the other closed end funds on $200K.
            Advent Claymore is my last one, and they are just as rude as e*turd.

            E*Trade is totally bereft of any moral compass or concern for helping folks like yourself out of this.

            I really give you all my moral support and wish for redemption for you. E*Turd is one tough nut to crack for sure.

            They will not go unpunsihed however.

            Kepp fighting.
            Stay in touch here on LD, he is one of our best prozies.

          • John W

            Barbara … any luck.. I hope you found an attorney at a fair cost.
            E*Trade has lost two recent arbitrations.. big ones, so our odds are improving.

  • Now E*trade will not even response to ARPS inquites.
    I get this sweet message from them if I try to email them a question>

    This account has been restricted from sending Secure Messages.

    Please call Customer Service for assistance:

    1-800-ETRADE-1 (1-800-387-2331)
    From outside the U.S. +1 678 624 6210
    24 hours a day.


    Dear Congressman

    I would like to suggest the inclusion in the agenda for The Financial Cris Commission to hold hearings on Auction Rate Preferred Securities, ARP a very important topic; The freezing still of $150 Billion of private Savings in ARP’s issued by Close End mutual Funds.

    This Freeze has the potential to undermine the trust and confidence in the U.S. Financial System as well as send our country further into recession as this $150 Billion were short term risk free investments held by individuals who would use that money to buy houses, start business, etc… Thousands of private investors like myself have the potential to loose our life savings because of the break down of the auctions for ARP’s issued by said Close End Mutual Funds.

    • ARP’s are issued by Close end Mutual Funds like Eaton Vance, Calamos, Advent Claymore, Merrill Lynch, etc.. Have a collateral of at least 2 to 1 of AAA rated bonds and were sold by the financial community as rock solid and liquid investment alternatives to Money Markets. For the past 20 years Banks and other Financial institutions, many stock brokerage firms; such as PIMCO, Schwab & E*Trade being the worst offenders, would sell this securities and make and support a market in order to offer and maintain liquidity.

    • Since February 14th,2008 all Banks and other Financial Institutions have stopped creating a market for this instruments leaving thousands of small investors like myself without access to our money. This investments are sold as Preferred Shares issued into perpetuity with no forced redemption date by the Close End Mutual Funds.

    • The Mutual Funds issued them with the intention of being liquid every 7 /28 days. They made arrangements with Banks and other major financial institutions to sell this securities and to make a market for this securities in order to sell them as alternative to money markets.

    • Contrary to what is happening in the Municipal Bond Sector , the Problem lies in that the Close End Mutual Funds have a provision that when an Auction Fails the rate is set up at a Maximum of 1.25% times higher than the Money Market rate. Thus making the penalty rate very low. Because the penalty rate is very low it does not attract new buyers who would create liquidity. Making matters worse Mutual Funds do not have the obligation to redeem the preferred shares and give us the promised liquidity. Closed end mutual funds even recognize this fact. See press release at the end of this letter issued by Eaton Vance, Inc on February 14th 2008.

    I would like for the financial crisis investigation committee to investigate on the repercussions of this and find a solutions as the sudden initial freeze of aprox. $330 billion dollars has severe consequences trough out our economy. This $330 billion were invested for short term, private individuals like myself. The effects of freezing $150 + Billion dollars pushes our country even further into recession and loss of confidence in the financial institutions. “

    • Larry Doyle


      Well done. I commend you for writing. I do know that auction-rate securities were referenced in passing by Mary Schapiro in her opening statement this past Thursday but this topic does deserve a full hearing.

      It is your money. The securities were not properly represented. In fact, almost every investor shares that the securities were misrepresented.

      You deserve full restitution…immediately.

      $150 Billion in outstanding ARS. By comparison, Wall Street bonuses this year are approaching the same number. That’s your money.

      Please keep us apprised if you receive a direct response.

      • RACCOON

        Larry D & other bloggers here.

        To update you:

        Never a response from anyone, not that I was expecting one.
        I have written Ed Perlmutter D-CO,( my Congressman, who is on the Finance Committe, no less, for almost 2 years, and all I get is form letters back. ( Called his office a dozen times, never feedback on this matter.)

        NADA, nothing from FINRA, SEC, FINRA Ombuds. N. Amer. Sec. Admin, and lip service from the State AG’s. PA is “still investigating” is all the worthless winch Mendelson can say.
        The Pom Pom team at CNBC, local newspapers as well, NADA response, not even a tiny fart out of any of them.

        These people could not find their own azz with a flashlight, two hands, and a map, let alone bring a fraud to reckoning.
        They all laugh at us, while they high 5 the likes of ETrade, Schwab, Oppenheimer, PIMCO, Blackrock..Advent Claymore, B of A , Citi, etc…

        Of course E*Trade aka E*Turd Pond Scum LTD, who slushed this trash off on me.. SOLICTIED no less, has ignored me for 24 months, and just hang up on me now, and letters from some low-rent attorney there telling me the case is closed, and I will receive no further response from them! The E*Turd baby needs a diaper change.

        I have written everyone from G. Bush ( in 2008) Obama, Bernanke, VP Biden, my state Senators, the so-called Regulatory agencies endlessly… probably have “invested” at least 2000 hours on this…. all to no avail!!!

        I don’t endorse Jack Stack and what he did in Austin, but it is not hard to understand how one could feel like that.

        Our so-called representatives are as useless as tits on a male pig, and only produce gas.

        From what I understand Canada Regulators forced all brokerages there to make whole anyone they sold that crap through a US correspondent broker in the summer of 2008.
        The US is just ruled for and by the elite and fat cats, Dem or Repbu. all the same paid-off, bought off liverworts of the Mafia-esk Wall Street Fraud brokers and banks.

        I SURRENDER, this is frecking hopeless!!!


        If I stole a candy bar from a grocery store I would face bigger consequences than these thieves who pawned off this ARPS stuff, and 150 BILLION frozen AND STOLEN, gets the attention of no one, unless you happen to be one holding the trash.
        NEVER TRUST ANY WALL STREET OR US “FINANCIAL SERVICES SO-CALLED CO. ENTITY, no decency, they f*uck with you, LIE TO YOU, emotionally THROW YOU UNDER THE BUS. , financially, and steal 25 years of your life’s work, in an IRA acct to boot!


        My advice to anyone would would be convert your printed green ink paper with old men on it or the electrons at a Wall Street bucket shop that say you have $XXXXXX principle, but .. wait you can’t get it back…, >into Canadian $ , Euros, Chinese yuan, gold & silver.

        I pray they all rot in hell, I am putting up the white flag, and moving to a kinder, gentler place.
        Two YEARS of battle ALL FOR NAUGHT!


  • John Wallace


  • John Wallace

    To Barbara *** Important ***
    You got to start raising more hell, as I have done with E*Turd. What they are doing to you is nothing short of crimminal!
    Contact the Pennsylvania AG office , a Carol Mendelson there and the Colorado AG office, Fred Jospeh, and a Rich Rogers in Colo Div of Securities Colo. DORA they call it.
    Both PA & CO are sort of the so-called leading states investigating the pond scum at E*Turd, and collecting stories now, albeit late to the game.

    Also, you need to perhaps consider filing a FINRA arbitration as April 3rd, 2010 is the filing deadline I have heard on ARPS.

    I am not advertising for this attorney, but he is excellent and has experience on E*Scum

    he is in Missouri
    Jason Kueser Law Firm

    write the FINRA Ombusdman, fine email on their web site under contacts.
    Do you web look on the above.

    Thank larry D. here and a Harry Newton in in Auction Rate Security scandal page for keeping this out in front with people.

    I would be happy to join you in a flaming torches/ hot tar and pitchfork parade to the E*Turd HQ.

    With them we are dealing with the lowest of the low, real pond scum, right uner Schwab and Oppenheimer.

    They have hung up on me , threathened me, indirectly, and ignore all correspondence. The Regulators are slow to understand.

  • Barbara

    Hi John,

    I just noticed your Feb. 1 correspondence. Thanks for your advice. I will follow through on your suggestions. Do you reside in NY?

    As for storming E*Turd HQ, I’ll join the pitchfork parade to their front door at least 🙂


  • Barbara


    Did you file a FINRA arbitration? Also, did you actually hire Jason to represent you or did he simply provide you some advice/guidance? I’m not sure if he can practice in NY.

    I just went on the FINRA website and it is extremely confusing as to how I would go about filing a claim and whether there is a “special” process for ARPS arbitration filing. Looks like there may be a special process for “consequential damages” for firms that have already settled with FINRA or with the SEC but I couldn’t tell whether there is a special process for ARPs arbitration against a firm that hasn’t settled with FINRA or the SEC. (for getting my principal back vs. strictly consequential damages)

    PS: You’re in excellent shape with only $50k outstanding. Congratulations!!! Unfortunately, I’m stuck with 350k outstanding in these damn ARPS.
    Can you advise? Thanks!!


  • John Wallace

    Hi Barbara,
    The short answer to your paragraph # 1 is yes & yes.

    Jason did give me about 3-4 hours of his time & assistance before he even “started the clock” so to speak. He is very fair and professional. Has “experience” with E*Trade. Many attorneys can practice in different states, so check with him. He is not “located” in my state either.

    I actually managed to get a FINRA arbitration filed and accepted in Dec. on my own, but only after 3 months of mental work/research, FINRA requests for more forms and initial rejections, and one week deadlines to meet. They made it as extremely dificult and hard as possible for us “little” people. After all they work for the brokerages! But I was tenacious, and finally got it filed. ( I probably saved myself $2K in attorneys fees, but I am not sure it was worth all the angst, and would not recommend it.)

    Then I felt like the dog that caught the car, not sure what to do next. So I “hired” Jason K., and I have been very pleased with how he handles things.

    You gotta get tough & mean with E*Trade, that is all they understand, they would let us all twist in the wind until hell freezes over with those damn ARPS.
    We were all sucked and lied to in the same manner it appears.

    The date for filing a FINRA complaint may be coming up around April 1st for this ARPS fraud matter.

    The consequential damages listed at FINRA are only to use for firms that have setteled. However, if you file an actual arbitration you can ask for punitive, consequential, and opportunity loss damages.

    Best of luck to you. Keep in touch here if you want.

  • John Wallace


    E*Trade wants to give you advice:;.v=1

    I wouldn’t let E*Trade manage the fleas on my dog’s back. How incredulous, after how they managed us into a fraud in 2007!

  • John Wallace


    They claim no money for ARPS victims, yet they would rather pay fines, and find money in the sofa for stupid baby super bowl ads.

  • John Wallace

    Financial Perversions Sold During Credit Boom

  • john w
    SLCG Releases Report Entitled ‘Auction Rate Securities’

    • LD

      Thanks John for sharing that white paper.

      Lots of good information. I did find it of interest that the paper highlighted that many auctions failed in mid-2007…which just so happens to be the time frame when FINRA dumped its bonds.

      Hmmmmmm ….coincidence?


  • Monika McCaffrey

    Hi: I also have money with “Advent Claymore” in these auction preferred securities that have been frozen for more than 2 years.
    Is there any kind of lawsuit that has been filed that I could join? Or any other actions that could be taken?

    Thanks for any feeback!


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