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Securities Fraud Blog

Greco & Greco, P.C.

W. Scott Greco

Fight Investment Fraud

Greco & Greco's lawyers represent investors to recover losses caused by securities fraud, churning, lack of suitability, negligence, sales of unregistered securities, unauthorized trading, and other misconduct by stock brokers, investment advisors, financial planners and their firms.

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Auction Rate Securities Redemption Analysis

In this Barron’s article, the author sets out one of the more complete analyses we have seen regarding the various types of frozen Auction Rate Securities, and their likelihood (or unlikelihood) of being redeemed or sold in the future.  The various types of ARS reviewed in the article include Municipal Issuers, Taxable Closed-End Funds, Municipal Closed-End Funds, Student Loans, and Collateralized Debt Obligations (CDO).

According to the article, the bleakest outlook is seen for the ARS backed by Student Loan Funds and CDOs which comprise about one-third of the ARS market ($105 billion of the $333 billion market).  Only about $1 billion of the $85 billion in student loan ARS have been refinanced to date due to high refinancing costs and little incentive to refinance the comparatively low rates these ARS are paying.

The Collateralized Debt Obligation ARS are an even thornier issue.  The Barron’s article states that the $20 billion in these ARS won’t be redeemed and that some may have invested in subprime mortgage securities.  The chart at the end of the article estimates the market price of these securities at 50 cents on the dollar.

Many brokerage firms marketed and sold ARS to investors as safe, liquid alternatives to money market funds.  If you are stuck with frozen ARS and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.

Posted by W. Scott Greco on 05/28/08.
Auction Rate Securities (ARS)CMOs / CDOsSubprime MortgagesPermalink

Schwab YieldPlus Losses

In a decline that has been described as “one of the more spectacular meltdowns in mutual fund history” by this San Francisco Chronicle article, the Schwab YieldPlus fund has declined by over 25% this year. 

The Schwab Yield Plus fund was supposed to be an ultra short term bond fund which was a “smart alternative for your cash,” but investors who expected the safety of a money market fund have suffered significant damages.  As shown by this Morningstar report, the fund invested almost 50% of its assets in mortgage related securities.

Investors who invested in the Schwab YieldPlus fund expecting a cash or money market alternative and subsequently lost a portion of their savings should contact an attorney to discuss their legal options.  Greco & Greco is a law firm experienced in filing arbitration claims against brokerage firms based on misrepresentations, omissions, securities fraud, and other wrongful conduct.

Posted by W. Scott Greco on 05/26/08.
Brokerage FirmsCharles SchwabMutual FundsPermalink

Some Auction Rate Securities to be bought back at discount

The Missouri Higher Education Loan Authority announced this week that it would begin buying back a portion of its auction rate securities at a discount on the Restricted Securities Trading Network.  See the related news stories in Forbes and the St. Louis Business Journal

This news is a mixed blessing for investors stuck with these or other auction rate securities.  While such a buy-back will finally allow them to escape from these investments, they will probably have to take a loss on the investment if it is bought back at a discount on a secondary market.  Many investors around the country were sold auction rate securities by major brokerage firms who incorrectly claimed they were safe, liquid, cash equivalents.  This has turned out to not be the case as evidenced by the collapse of the auction markets earlier this year.  Such sales practices can form the basis for claims of federal and state securities fraud among other causes of action.

If you are an investor who was sold Auction Rate Securities, and you would like to discuss your legal options with an attorney, please Contact Greco & Greco.

Posted by W. Scott Greco on 05/09/08.
Auction Rate Securities (ARS)BondsPermalink

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