TDAmeritrade (AMTD), Oppenheimer (OPY), And Raymond James (RJF) Try To Dodge Auction-Rate Buy-Backs

By Douglas A. McIntyre Updated Apr 28, 5:48AM EDT · Published Aug 19, 4:49AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

R218533_855025 Several of the modest-sized investment houses say they should not have to buy back auction-rate securities which they sold to their customers.

The dog ate their homework.

TDAmeritrade (AMTD), Oppenheimer (OPY), Raymond James (RJF), and several other discount brokers and financial firms have a novel and spurious defense. Since larger banks and brokerage companies made the market in auction-rates, the small investment houses were as much victims as their customers were. According to The Wall Street Journal, "The brokerages say they were merely sellers of auction-rate securities, which differentiate them from the investment banks that ran the auctions."

The reasoning is a cynical disavowing of responsibility. It rests on the logic that the managements at firms like TDAmeritrade never read the fine print when they took on the right to sell auction-rates. In other words, they were morons and dupes.

The argument is senseless. The smaller firms took on the risks and rewards of marketing auction-rates just as they do stocks, bonds, or mutual funds. Imagine Raymond James saying that it wants to blame Morgan Stanley (MS) for the poor performance of one of the MS mutual funds. If a Raymond James customer loses money in a fund managed by Morgan, all parties understood that there was some risk. And, Raymond James made a commission selling that investment to its customer.It would not ask Morgan to make the client whole.

Oppenheimer and its peers knew exactly how the auction-rate markets worked. They almost certainly sold the paper to their clients as "cash equivalents". Now they would like to wash their hands of the matter. Ignorance is not an excuse, particularly when it is a facade.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.