Morgan Stanley to buy back ARS

Morgan Stanley of New York said late yesterday that it will start buying back auction rate securities from retail clients. The repurchase program will begin sometime before Sept. 30 and involve $4.5 billion of ARS, the firm said. Morgan Stanley has notified state and federal regulators of its intention to repurchase the securities. The firm will also reimburse clients who sold securities at a loss, as well as the interest costs incurred by clients who took out loans against their ARS positions. Until the program begins, Morgan Stanley will be providing no-cost loans for clients. Like UBS AG of Zurich, Switzerland, and Citigroup Inc. of New York, which recently settled ARS cases brought by regulators, Morgan Stanley will participate in a special arbitration program for ARS investors who claim “consequential” damages from not having access to their funds. Regulatory investigations against Morgan Stanley over ARS sales are still pending.