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Around Valentine’s Day three years ago, holders of auction rate securities fell completely out of love with the debt instruments, causing a market freeze and a slew of lawsuits against the banks with claims of misrepresentation.

Today, the trouble continues as banks grapple with a liquidity-stricken outcome. Auction rate securities were viewed as cash equivalents from the inception of the ARS market in 1984 until February 2008, according to Pluris Valuation Advisors, a valuation firm that specializes in illiquid and distressed securities and business valuations, with offices in New York and California. Like other cash-equivalent securities, they were marked at par. Corporate or municipal bonds with a long-term nominal maturity where the interest rate is regularly reset are typical examples of ARS.

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