NEW YORK (Dow Jones) -- Despite the recent rash of auction-rate securities settlements between regulators and the Wall Street banks, investors shouldn't hold their breath waiting to be cashed out.
For all the excitement of the past week, the narrow terms of the agreements mean that only investors who bought directly from the banks can be sure they will be bought out. That leaves a whole class of retail investors in danger of being left behind -- those who bought auction-rate securities from what are known as discount brokerage firms.
The settlements entered into by banks including Citigroup Inc (C), Wachovia Corp. (WB) and UBS AG (UBS) ensure that the banks will buy back from their retail brokerage customers and not necessarily anyone else.
The deals so far announced total about $56 billion of the auction-rate securities market -- but there are $210 billion of such securities unredeemed, according to research firm Restricted Stock Partners.
This means that if an investor bought auction-rate securities underwritten by UBS from a broker at Oppenheimer & Co., they may not get their money back.
Oppenheimer has stated this explicitly to its clients. In a note sent on Aug. 14, it said, "In almost all of the [announced settlements], institutional investors and retail clients with significant holdings may have to wait significantly longer for such repurchases, if at all."
The company made no commitment to buy back the shares itself, instead offering its investors loans if they choose to cash out. Officials at Oppenheimer did not return calls.
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