Auction Rate Securities: Arbitration is Quicker than Settlement

Kansas City, MOThe big news in Auction Rate Securities (ARS) is that some of the financial firms, such as Citibank, Bank of America and UBS are in negotiations with regulators about payoff programs for clients who purchased auction rate securities. However, according to Diane Nygaard, founder of the Nygaard Law Firm, nothing has been finalized and no one has been paid yet.

"There are still issues about whether people will get their money back and when," Nygaard says. "To date, the settlements do not include accounts held by corporations or businesses. The earliest paybacks, if approved, would be to the people with the least amount of money involved. For example, if the UBS settlement is approved, people with less than $1 million before the auction rate securities market collapsed, are supposed to get their money back starting in October. Between January 1, 2009 and January 1, 2011, people with more than $1 million in auction rate securities will be paid back by UBS – but negotiations have been conducted over two months and nothing is signed.

According to Nygaard, a sticking point in the settlement talks regards corporate accounts and businesses that kept their money in auction rate securities. Nygaard says that businesses that kept money in auction rate securities, thinking they were secure, are now phoning her firm to file arbitrations because proposed settlements won't help them.

Nygaard's firm recently settled an arbitration against a financial firm regarding auction rate securities for over $1.5 million. Her clients were awarded par value for their auction rate securities, attorney's fees and interest. "We got them more money back than if they had waited for the settlement," Nygaard says. "We are suggesting that people still proceed with FINRA arbitration. Those getting their money back the most quickly are those who are filing FINRA arbitrations."

In fact, the arbitration claim that was recently settled was only filed in June. It took only three months to reach a settlement in that case.

Nygaard says that her firm is in the process of filing many arbitration claims. She emphasizes that businesses whose working capital was frozen, preventing them from pursuing projects, should file FINRA claims. A special FINRA arbitration format has been set up for ARS claims. This format ensures that the industry arbitrator on the panel has not ever worked for a broker dealer that sold auction rate securities.

If you or your business had money invested in auction rate securities when the market collapsed, contact a lawyer to discuss your options. It is not too late to file a FINRA arbitration claim.