Although many of the large banks have announced high-profile plans or legal settlements to buy back auction-rate securities from investors, hundreds of thousands of individuals who bought these same products from smaller brokerage firms will not benefit. As reported in today’s WSJ, while the large banks have agreed to to buy back around $70 billion of ARS, these agreements do not include buying back securities underwritten by them but sold by smaller or mid-size brokers who were essentially “resellers.”
These resellers include firms such as Oppenheimer & Co., Fidelity Investments, Stifel, Nicolaus & Co., Northern TrustCorp. and H&R Block Financial Advisors Inc. Tens of billions of dollars in ARS were reportedly sold by these firms, often to individual investors. State regulators in Massachusetts and Michigan have been trying to work with banks to find a way to “make investors whole, short of litigation.” Some firms like Fidelity, however, argue that a vast majority of its customers make their own investing decisions, and that Fidelity didn’t actively market ARS.