Liquidity Crisis, Part 2: Auction Rate Securities

Law360, New York (April 8, 2008, 12:00 AM EDT) -- A recent spate of litigation suggests that plaintiffs lawyers now are combing the financials of numerous companies, and scrutinizing how various funds, broker-dealers, and public companies have characterized and marketed auction rate securities to their investors.

Auction rate securities typically are municipal bonds and other highly rated financial instruments whose interest rates are set at periodic auctions, that also give holders the option to sell their securities. Although these securities usually have long-term maturity dates, for years auction rate securities have been classified as cash equivalents,...
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