Deals Cut On ARS Take Heat Off Brokers, Advisers

Aug 2008 // InvestmentNews

The credibility of brokerage firms take a heavy hit amid billlions of dollars of auction rate securities buy backs and pay millions of dollars in fines to state regulators. These investments were sold to clients as safe and low-risk investments as an alternative to cash.

“It seems you can’t bring a claim against Citi or a court case. It appears that this could head off lawsuits,” said Tom Ajamie, an attorney based in Houston who represents investors in arbitration claims against firms.

“The regulators want people to get their money, but they’re also trying to prevent a collapse” of the banks, he said. Mr. Ajamie added that Citigroup, Merrill and other financial institutions are dealing with a variety of severe problems stemming from the meltdown in the mortgage market.

“The regulators realize that the money is owed today, but the banks just cannot pay it out today,” he said.

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