Auction-Rate Securities Lawyers

Bank of America Faces Lawsuit over Auction Rate Securities

A lawsuit was recently filed against Bank of America Corporation on behalf of people who bought auction rate securities (ARS) from the company. Many people experienced a significant financial hit during last year’s credit crunch and the current slowing economy. Lawsuits have been popping up against numerous investment banks across the country.

According to the law firm press release issued last month, the bank violated certain sections of the Securities Exchange Act of 1934. The bank allegedly deceived investors about very important investment characteristics of auction rate securities and also the market in which they were traded.

What are Auction Rate Securities?

Auction Rate Securities are municipal bonds, corporate debt securities, or preferred stocks that pay interest rates at periodic rate auctions. Bank of America management allegedly sold auction rate securities to the public as highly liquid cash-management vehicles. They had even been considered to be suitable alternatives to money market accounts.

Since major broker-dealers decided to “withdraw their support” for the periodic auctions, investors have been unable to liquidate their positions since February 13, 2008. The Bank of America lawsuit claims that the bank failed to disclose certain pieces of information about auction rate securities, including the fact that they are not cash alternatives, but complex, long-term financial instruments with maturity dates some 30 years in the future. Investors also believe that the auction rate securities were only liquid at the time of sale, and that major broker-dealers, including Bank of America, manipulated the market to give the appearance of liquidity and stability.

If you need representation for your own auction rate securities lawsuit, contact an auction rate securities lawyer at 800.220.9341.