Summary of Auction Rate Securities (“ARS”) Buy Back
Information for Retail Customers
Auction Rate Securities (ARS)
The
Florida Office of Financial Regulation (OFR) is part of
a multi-state working group conducting examinations
involving auction rate securities. The state
examinations center on sales practices and supervisory
issues related to the sale of auction-rate securities.
There
are generally two types of auction rate securities-
bonds with long-term maturities (20 to 30 years) and
preferred shares with a cash dividend. The interest on
the bonds and the dividends on the preferred stock are
variable and are set through auctions. The auctions
usually occur every 7, 14, 28, or 35 days. The auctions
provide the primary source of liquidity to ARS investors
who wish to sell their investments.
Recent
developments in the credit market have led many of the
ARS auctions to fail, which may prevent existing
investors from selling their ARS holdings. In
anticipation of illiquidity and failed auctions, some
issuers may have made provisions to restructure or
redeem the investments.
If you
have been affected by the auction failures, believe
these investments were misrepresented, and wish to file
a complaint with the OFR, please file or request a
complaint form on our website,
http://www.flofr.com/Securities/Complaints/DOSComp_Process.htm.
Useful
links:
Financial Industry Regulatory Authority (FINRA) news
release dated March 31, 2008:
“FINRA Issues Guidance to Investors
Caught in ARS Auction Failures”
North
American Securities Administrators Association (NASAA)
current headline dated April 17, 2008:
“State Securities Regulators Coordinate
Ongoing Auction-Rate Securities Investigations”
