A number of brokerage firms that sold auction-rate securities, including Fidelity Investments, do not think they should be forced to buy back the instruments, much as the investment banks that created them have been doing, to the tune of $40 billion, The Wall Street Journal reports. Their thinking is that they were merely sellers of the ARS and didn’t have knowledge of their imminent demise, as the banks that ran the auctions did. 

But the lawyers for the investors who bought auction-rate securities from Fidelity, Oppenheimer & Co., Raymond James and Stifel Nicolaus say they should have been aware of their risks.


Regulators this week said that their investigations were never solely focused on the investment houses but also on how other parties sold the auction-rate securities.


“The culpability of downstream brokerages will depend on the facts uncovered in our investigation,” said a spokesman for New York Attorney General Andrew Cuomo. “What did they know about the liquidity risks of the auction-rate securities, and when did they know it? And, most importantly, what representations, if any did these brokerages make to their customers?”

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