Opinion ID: 799254
Heading Depth: 2
Heading Rank: 7

Heading: ARS Brochure and New Disclosure Procedure

Text: To underscore that Morgan Keegan knew about, and easily could have disclosed, the liquidity risk of ARS (especially during the early 2008 time period), the SEC also points both to a Morgan Keegan ARS Brochure (published in hard copy) and to the effective disclosure policy Morgan Keegan instituted after March 20, 2008. The ARS Brochure is a short, tri-fold brochure describing Morgan Keegan's ARS products and their liquidity risk. The ARS Brochure includes many of the same liquidity risk disclosures contained on the ARS web page and in the ARS Manual. For example, the ARS Brochure states that (1) investing in auction rate securities involves certain risks that differentiate such securities from money market investment instruments, (2) [t]he ability of an investor to dispose of a share of an auction rate security may be largely dependent on the success of the auction, and (3) [t]here 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. During 2007 and 2008, Morgan Keegan had hard copies of the ARS Brochure available at some of its office branches. [5] Morgan Keegan also emailed the ARS Brochure to all of its brokers, but there is no evidence that Morgan Keegan emailed the brochure to customers purchasing ARS. Instead, Morgan Keegan provided the brochure to customers only upon request. Morgan Keegan did institute a new disclosure policy on March 20, 2008, after the collapse of the ARS market. Under the new policy, Morgan Keegan required prospective ARS customers to sign this statement: I understand that many auction rate securities are currently, or have been recently, failing at auction. I understand that it may be a considerable period of time before liquidity returns to this investment and I view this with a longer term horizon.