Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, March 31, 2008

FINRA Offers Guidance on ARS

FINRA today spelled out the options available to investors holding unexpectedly illiquid auction rate securities (ARS) because of recent developments in the credit market that have resulted in many ARS auctions failures: Auction Rate Securities: What Happens When Auctions Fail.  What are the options?  They include continuing to hold the securities, selling in the secondary market, liquidating other investments, or borrowing on margin.  With respect to the latter, FINRA provides the appropriate warnings about the dangers of borrowing on margin, but this surely is a risky and dangerous option for most investors.

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