Opinion ID: 799254
Heading Depth: 2
Heading Rank: 5

Heading: ARS Web Page

Text: Although the trade confirmations do not mention liquidity risk, an ARS web page posted on Morgan Keegan's website shows that Morgan Keegan knew how to advise customers about liquidity risk. The ARS web page first describes ARS as A Great Place for Short-Term Money and states that many investors find ARS to be an attractive alternative to tax-exempt money market funds, commercial paper, certificates of deposit, and U.S. Treasury bills. However, the ARS web page then cautions that ARS provide (but do not guarantee) liquidity at par through weekly and 35 day auctions. More significantly, this same ARS web page later on specifically mentions the liquidity risk associated with ARS, and distinguishes between ARS and money-market funds, as follows: You should be aware that investing in auction rate securities involves certain considerations that differentiate such securities from money market investment instruments.  Liquidity RiskThe ability of an investor to dispose of a share of an auction rate security may be largely dependent on the success of the auction. There is no assurance that any particular auction will be successful, and neither the issuer nor any broker dealer is obligated to take any action to ensure that an auction will be successful. In the absence of successful auctions, there is no assurance that a secondary market for the auction will develop or, if such a market does develop, that shares will trade at or close to par. The SEC does not contest that the ARS web page, as a whole, adequately describes the liquidity risk of ARS. The SEC complains, however, that Morgan Keegan did not give the ARS information on this web page directly to its customers and did not even direct its customers to this web page or make the ARS web page easily accessible to its customers. The SEC notes that accessing this ARS web page required four separate navigation steps from Morgan Keegan's homepage. And, despite the requirements in the cease-and-desist order, Morgan Keegan's trade confirmations did not provide customers with the URL for the ARS web page where they could find the description of Morgan Keegan's auction practices and procedures. Although it asserts that its ARS web page was easily accessible, Morgan Keegan has not cited to us any evidence showing the structure of its website or the navigation necessary to find its ARS web page. The only evidence in the record is a five-page printout of an archived version of the web page itself.