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ARS UPDATE: Cries for Help Go Unanswered

Posted by Larry Doyle on February 27, 2013 8:21 AM |

February 14, 2008: The auction-rate securities market freezes, and tens of thousands of our fellow citizens’ lives are forever changed as that simple American virtue of “trust” goes out the window never to return.

I have long described the ARS market as Wall Street’s greatest scam. Five years out, the pain of this fraud continues and ARS investors’ cries for help go unanswered.

What happened to our country? I will tell you what happened. Our government and regulators are ineffectual at best and corrupt at worst. You do not think so? Let’s navigate. 

February 2013: A few weeks back, an ARS investor shared with me that a New York State regulator informed him that he “should have known better” than to have believed the industry pitch that ARS were a cash equivalent. How about that? That’s our government working for us.

When dealing with a representative at the firm through which he purchased the ARS, he informed me that he was told “get over it.”

An individual is robbed — and make no mistake, that is exactly what has happened in the ongoing ARS saga — and is told he “should have known better” and to “get over it.”

Banana republic anybody?

Just yesterday, another ARS investor informed me of the following:

1. I purchased the ARS through Raymond James (RJ).

2. I still have the Jefferson County ARS in an account at RJ

3. I attempted arbitration 2 years ago against RJ and lost. The State of Florida then settled with RJ 6 months later, forcing RJ to repurchase the ARS from buyers, however, the Final Settlement Agreement specifically excluded those individuals who lost at arbitration (i.e. my wife and I included).

My wife and I protested to the State of Florida Financial Division (responsible for the Final Settlement terms with RJ) but were told that the settlement could NOT be altered. They were “sympathetic” but not “interested.” As an aside, RJ admitted in the Final Settlement that they violated Florida State laws and statutes in the sale of these ARS.

Sympathetic, but not interested. How gracious. Well, how about if we were to inform the IRS and other government agencies that we are sympathetic but not interested in paying taxes. Really? Yes. Remember our friends back in the late 1700s who coined the phrase, “no taxation without representation.” The ARS investor continues:

4. I have tons of communications with RJ, including interesting documents related to discovery from the arbitration.

5. I spoke with the Florida AG office but they are not responsible for financial regulatory matters.

Why doesn’t Raymond James make these investors whole? Because they do not have to. What a way to run a business.

Why didn’t the State of Florida include the investors who had exercised their rights to arbitration in the settlement rather than selling them down the river?

The Federal Reserve has its printing press running full speed 24/7. Markets are flush with liquidity. Raymond James could issue debt or equity TODAY and make this investor and every other investor whole. So why don’t they? Because they do not have to.

See, this is how crony capitalism works. Firms take care of their cronies so they can screw their investors.

Anybody from Raymond James got a conscience? Maybe somebody from RJ can write to us and either refute that premise or explain to us where and how I am wrong. Or, even better, inform me as to whom this investor can contact so as to be made whole. I assure you that if that were to happen, I will devote a week’s worth of glorious commentary about your firm here at my site.


Rest assured this commentary will go viral.

Navigate accordingly.

Sense on Cents/Auction-Rate Securities

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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