Morgan Stanley Has To Repurchase $323M ARS

Morgan Stanley is set to repurchase $323 million worth of auction rate securities (ARS) from New Jersey investors to settle claims that it misled investors when marketing and selling the products, according to Bloomberg. Morgan Stanley is one of many banks that have agreed to buy back ARS from individual investors to settle state and federal regulatory actions claiming the firm misled investors about the risks associated with the investments. In 2008, Morgan Stanley agreed to repurchase $4.5 billion of the auction rate securities (ARS) in a settlement with the state regulators. The $323 million is New Jersey’s portion of that overall settlement.

The auction rate securities market dried up in February 2008, when banks stopped using their own cash to support the market, causing investors to be unable to access their funds. This was in contradiction to the way the product was pushed to investors as being safe, cash like, highly liquid and yielding a higher return.

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