The auction rate securities market is currently undergoing "one of the costliest mis-selling scandals of the credit crisis to date. Thousands of individuals...have been left holding bonds that they cannot sell, despite being told that these investments were the equivalent of cash" (Foley, 2008). Until recently, Wall Street would step in to "buy the bonds at auction if demand was weak, so that holders could cash out," but "amid the spiraling credit crisis, they stopped acting as buyers of last resort and since then almost 60 per cent of auctions have failed" (Foley, 2008). Jonathan Levine, attorney at San Francisco's Girard Gibbs law firm, states, "We think this is one of the biggest frauds on Wall Street in years...People can't retire, small business owners cannot pay payrolls, it is affecting people's lives" (Foley, 2008).
The article "UBS hit with New York auction-rate security suit" describes how New York state Attorney General Andrew Cuomo brought suit against UBS for "falsely marketing and selling auction-rate securities as safe, cash-equivalent investments at a time when the market for these securities was under severe strain" (Ellis, 2008). Per Cuomo, "You can't have two sets of rules-one set of rules for customers and one for senior officials" (Ellis, 2008). In a related article, New Yorker Bruce Coughlin is reported as discovering that his mother had 60% of her savings in $100,000 of auction-rate securities when she died earlier this year and had told him that "the cash was in an easy-to-sell money market fund" (Foley, 2008). However, after her death, the broker at Smith Barney told him that he could not sell the securities, as the fund is a "long-term" investment (Foley, 2008). Coughlin asked the broker, "So you mean you sold a 76-year-old woman a fund that would be impossible for her to get out of?" (Foley, 2008). Coughlin further comments, "Just how long a long-term horizon did he expect her to have...