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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.

  • Peter Scannell

    Raymond James Mission Statement

    Our Pledge

    “We, the associates of Raymond James, commit our energies, intellect and knowledge to attaining the financial objectives of our clients by providing the highest possible level of service and delivering superior investment alternatives. We believe that putting the financial well-being of our clients first ultimately serves the best interests of our shareholders, our communities and ourselves. Remaining responsive to the needs of our clients in a financial environment characterized by constant change is our continuing challenge.”

    Raymond James Milestone Spotlight

    “We’re proud to announce that our firm has achieved 100 consecutive quarters of profitability.”

    “October 19, 1987: Black Monday. The markets collapsed, with the Dow Jones Industrial Average losing 23% of its value.While other firms closed their trading desks to minimize internal losses, Raymond James kept its desks open to meet clients’ needs. This was our first, last and only unprofitable quarter since the firm went public.”

    Another mission statement that is full of crap!

    • Peter Scannell

      Obviously the liquidity crisis has past – what’s the excuse now for failing to make mom and pop ARS victims whole?

      “Dimon Says Banks to Have More Capital Than They Can Use.”

      • Peter Scannell

        “Galvin calls Charles Schwab on fine-print ‘green light to steal”

        A recent change to Charles Schwab Corp. fine print keeps customers from joining class action lawsuits, and all regulators can do is beg the brokerage not to make the change.

        Secretary of the Commonwealth William F. Galvin is urging Charles Schwab to reconsider the decision, and today sent a “rebuke” to Schwab, and a plea to investors to “vehemently object to any change in their rights to participate in class actions.”

        Schwab’s new customer arbitration agreement requires customers to waive the right to bring or join civil class action lawsuits against the firm. Last week, the Financial Industry Regulatory Authority (FINRA) ruled Schwab had violated rules prohibiting firms from preventing customers from civil class actions. However, FINRA also said it was powerless to enforce its longstanding rule because it conflicts with the Federal Arbitration Act.

        Schwab argues its customers are better served by the FINRA arbitration process than by filing class action suits in civil court.

        In his letter, Galvin calls that argument “disingenuous,” and says the decision “is akin to giving every rogue broker-dealer the green light to steal from their customers in small dollar amounts.”

        A Schwab spokesman issued the following statement: “We believe the evidence is overwhelming that investors – large and small – are better served through arbitration than class actions, where the plaintiff’s lawyers reap the lion’s share of settlements to the detriment of the investor.”

        Galvin has also written to the U.S. Securities and Exchange Commission asking it to use its rulemaking powers under the Dodd-Frank act to stop firms from forcing customers to waive their right to file class action suits.

        Galvin is asking Schwab, “as a good corporate citizen,” to reconsider the arbitration clause.

        You can’t make this stuff up…mom and pop don’t have a clue!

  • Tom

    Far easier for Uncle Sam and his pals in the states to just forget about people than take on the banks and brokers who crushed people with this stuff.

    5 years and still waiting to be made whole on a cash-equivalent investment? Yeah, I want to do business with these guys….NOT.

  • Mr. D

    What a bunch of wimps this country has become! That is why politicians, government agencies and business have no fear of screwing any and everyone. Because they know people will just whine like little babies and do nothing more. Get off your butts and make them personally and business wise PAY! If politicians, government employees and people in business knew they would have to pay for what they did, not necessarily just legally, they might think twice of screwing people then just walking away.

    An office catches on fire, cars in a company parking lot ignite after some gas accidentally spills in the lot, a residential house burns down and who knows what else could happen via “BAD KARMA” You see these people have no fear for their actions.

    What wall street did to these people was steal their money! When someone steals your money can’t you try to stop them? Shouldn’t you go and take it back? Shouldn’t the thief be punished? YES! YES! YES! People get off your asses. Make theses crooks pay. The brokers, managers, officers and directors are all thieves that took your money.

    God hates a coward and just letting them get away with it tells them they can do it now and anytime in the future they want. To come home and find their house burned down or to show up at the office and find out it is no longer there is all they understand…FEAR! People have to fear that their actions will cause them harm.

    Get out and take some form of revenge or hire someone to do it for you. The only way you will get your money back is if they fear for themselves if they don’t.

    Believe me it works!

    • Randee

      So you’re calling for what? an asasination? Slashing the broker’s tires? You sound like a complete loon. Your reading comprehension sucks too. The reason these ppl are out their money is because they tried to seek retribution by going to court.

      The ARS crisis was a big scam by the banks and those responsible should be imprisoned. BUt this comment speaks to the instability of many of the anti-government nutballs who frequent this site.

  • Small BD

    So many laws- So few resources. Well, a decision has to be made as far as which laws are more important than others, and which group of people are more deserving of justice. ‘Luckily’, there is a simple formula for this: Laws are generally political tools. Rockefeller laws, for example. From the esteemed Justice Scalia speaking on Section 5 of the Voting Rights Act:

    Justice Antonin Scalia suggested that the continuation of Section 5 of the Voting Rights Act represented the “perpetuation of racial entitlement,” saying that lawmakers had only voted to renew the act in 2006 because there wasn’t anything to be gained politically from voting against it.

    ….”Even the name of it is wonderful, the Voting Rights Act. Who’s going to vote against that?”

    Voting Rights Act Supreme Court Case: Scalia Condemns ‘The Perpetuation of Racial Entitlement’

    Of course I in no way intend to make any generalizations concerning Justice Scalia.

    I wish that I had time to research why, despite being obvious for over a century, it is suddenly shocking that wealthy people are evading taxes via Swiss bank accounts, and NOW is the time to go after UBS, et. al.????

  • Jay

    Simply unbelievable …and so sad.

  • Steve

    You may want to update Wikipedia because when you google “ARS securities” you see the definition and it says most were repurchased at par.

    Your readers may want to amend that to say”…except Raymond James Securities and others.”

    I subscribe to the view that we were all culpable Politicians, Wall Street, Real estate participants, investors) for the great financial disaster but I enjoy reading your points of view and think your writings are done well.


  • Ray

    Cries for help go unanswered much to often in this corrupt nation of ours but not to God. Just finished reading Blood Medicine about Big Pharma. People dying by the thousands as a result of the drug Procrit produced by J&J and Amgen (Epogen), which was never tested under stringent criteria. FDA does not halt the promotion or the sale of this drug. Unconscionable to commit murder.

    Then the drug companies provided kickbacks to doctors and oncologists for buying the drugs, and showed how they could bill Medicare for the ful.price. Unconscionable to kill for greed.

    The whistleblower, Mark Duxbury, after years of being harassed and fired by J&J, and years of trying to get his case before the assinine court system died. His whistleblower case is now before the Supreme Court that has asked the government to weigh in. Murder and bilking the people of America from 3-10 billion $ and the court has to ask the government to weigh in. Unbelievable.!!!!!!!

    It makes me sick to continue to read this stuff day to day. There is no shame in amorality anymore. What a hellhole of a system we have today. Hell is the only proper (un)resting place for these murderers and crooks along with Satan. The Washington, Wall St and Corporate Mafia are riding high. But pride and greed come before the fall.

    Come Lord Jesus come!

    Blessings to you.

  • Marcus

    Thanks for keeping this issue alive. Mistakes forgoten are doomed to be repeated. So many guilty have gone unpunished. So many punished not deserved. A few % appreciation and people forget quickly. Best wishes to those who are still in this nightmare for a quick resolution. Be comforted that good people inside and outside the industry did not look the other way and did what they could to help.

  • Bill

    The powers that be were and are only interested in bailing out large financial institutions, not making whole individual investors who were defrauded by those same institutions. Best to get used to it.

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