Billions Not For The Plaintiffs Bar

Major brokerage firms are agreeing to buy back billions of dollars of outstanding auction-rate securities—a welcome surprise for investors, whose assets lost liquidity overnight when the market for the securities collapsed in February.

The giant buyback agreements represent a novel approach to resolving regulatory investigations. But equally, if not more, interesting is the profound impact they will likely have on the considerable private litigation begun in the past six months.

Although the plaintiffs bar has viewed the downfall of the auction-rate market as a boon for their business, that now seems unrealistic. The recent agreements may effectively shut down pending and future private litigation on behalf of auction securities investors.