SLCG Releases Report Entitled 'Auction Rate Securities'

WASHINGTON, Feb. 22 /PRNewswire/ -- Securities Litigation and Consulting Group, Inc. ("SLCG") this morning released a research report entitled "Auction Rate Securities."  The report's primary authors are Craig McCann, Edward O'Neal and Joseph Prendergast.  All three are Principals of SLCG and expert witnesses.  Dr. McCann and Dr. O'Neal are former professors and SEC economists.  Last year Dr. Prendergast published an article in the Journal of Fixed Income entitled "Fundamental, Flight-to-Quality, and Flight-to-Liquidity Components in Subprime Mortgage-Backed Security Returns" which was designated as one of "20 Leading Global Financial Articles of 2009" by Institutional Investor Journals.  

The SLCG report explains that Auction Rate Securities (ARS) were marketed by broker-dealers to investors as liquid, short-term, cash-equivalent securities similar to traditional commercial paper but are, in fact, long-term securities and only appeared to be short-term securities because brokers propped up the frequently held auctions.  In early 2008 ARS auctions failed in large numbers as brokers withdrew their support.  The SLCG report states participating broker dealers had better information than public investors about the creditworthiness of the ARS issuers and were the only parties with information about the broker dealers' holdings and inclination to abandon their support of the auctions.  This severe asymmetry of information made public investors in ARS vulnerable to the brokerage firms' strategic behavior.

The SLCG auction rate paper and other working papers are available at http://www.slcg.com/research.php.

Securities Litigation and Consulting Group, Inc. ("SLCG") is a financial economics consulting firm based in the Virginia suburbs outside of Washington, DC.  SLCG provides consulting services and expert witnesses to law firms, publicly-traded corporations, banks, brokerage firms and individuals involved in complex litigation throughout the United States.  SLCG's staff includes PhD, MA and BA level professionals with academic, industry and government experience.  Its experts have testified in state and federal court and in various arbitration forums.

For further information about SLCG or its research, please contact Dr. McCann at 703-246-9381 or [email protected], Dr. O'Neal at (336) 655-8718 or [email protected], or Dr. Prendergast at 703-246-9382 or [email protected] or visit us at www.slcg.com.

SOURCE Securities Litigation and Consulting Group, Inc.