Major banks sued over ARS lockdown

Morgan Stanley, UBS, Merrill Lynch and Deutsche Bank have been named as defendants in the first wave of legal action by investors left holding illiquid auction-rate securities (ARS).

The ARS market ground to a halt in February as broker-dealers pulled out of the sector and stopped acting as buyers of last resort for securities that failed to attract bidders at auction. As a result, investors have been caught holding what they thought were short-term securities, in a market suffering a shortage of

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