TD Ameritrade Agrees to Reimburse Auction Rate Security Customers

Think the auction rate security saga is over? Not. Today, TD Ameritrade agreed to pay $465 million to its customers to reimburse them for losses taken in the ARS default mess.

Think the auction rate security saga is over?  Not.  Today, TD Ameritrade agreed to pay $465 million to its customers to reimburse them for losses taken in the ARS default mess.

Bloomberg reports that:

"The online brokerage sold auction-rate securities as safe, cash-like investments, as did many other firms. Banks managing auctions abandoned the $330 billion market in February 2008, stranding thousands of investors who could no longer unload the securities. The accord will let clients sell back securities they bought from TD Ameritrade before the market froze."

Kudos to TD Ameritrade.  This is good news for its customers and shows it has the financial werewithal to back up its customers.

But in the big picture, $465 million is peanuts.  Citi was involved with $19.5 billions of frozen auction rate securities. Much of the remaining money is also locked in Student Loan Auction Rate Secuities and Preferred Auction Rate Securities that are controlled by large investment houses like Pimco, Nuveen, etc. Hopefully these companies will find a reasonable remedy for their auction rate security holders.

 

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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