When the auction rate securities mess was first brought to light, there was an article in the St. Petersburg Times in 2009, reporting that while institutions like Bank of America are placating regulators and investors by buying back the hard-to-trade securities from customers, Raymond James chief executive Tom James told clients in a letter that the company doesn’t have access to financing to cover “anything near” the $1-billion outstanding owned by its clients.

Even if he could buy back the securities, James said, regulators would not give his company credit for the securities because they are illiquid. James also wrote that some large banks that have pledged to buy back securities “perhaps even with funds provided by the federal government for other purposes,” but have not yet repurchased everything.

The market for auction rate securities, which had been sold by nearly every large firm on Wall Street as a cash equivalent, seized up in February 2008, precipitating the stock market crash that September.

ARS or auction-rate securities, are long-term debt instrument designed to trade like short-term securities. They were issued by many municipalities and closed-end mutual funds, and often pitched to small investors as safe and easily redeemable. In early 2008, as the credit crunch intensified, the $300-billion auction-rate market froze, leaving investors unable to sell their holdings. When the market for the securities froze, Raymond James Financial’s clients held $1.9 billion in auction rate debt.

In a lengthy letter to clients in 2009, filed with the Securities and Exchange Commission, James alluded to other underwriters that allegedly knew that auctions were failing, had suppressed research reports or employed executives who liquidated their own positions while still selling to clients. “To the best of my knowledge, we didn’t participate in those types of acts,” James wrote.

Also in his letter, James said he couldn’t remember a significant number of failed auctions in auction-rate securities for almost 20 years. James said he understood clients could conduct business with whomever they wish. But he urged patience and understanding, noting that he personally still owns a large number of auction-rate securities.

In some of the more recently settled auction-rate cases, claimants allegethat their brokers recommended, and then invested their money in, an auction rate securities when they opened their account with Raymond James & Associates in or around January 2008.

The claimants also alleged that the broker’s “actions and conduct created the false impression that there were deep pools of liquidity in the auction market,” according to the arbitration award.

In one instance, the key to the investors’ $925,000 recent award, was the timing of the purchase which was reported in InvestmentNews.com. Thirty-five days after the couple made the purchase, their securities came up for auction for the first time. The auction failed, he said, and the clients never had the chance to go to auction.

If you feel you have a claim against Raymond James Financial, Inc., for selling you Auction Rate Securities (ARS) and would like to potentially recover your losses, contact  a lawyer for a free consultation at Soreide Law Group, PLLC, at:  www.stockmarketlawsuit.com or call (888) 760-6552.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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