The Secretary of State in Massachusetts today pressured Fidelity Investments to buy back auction-rate securities that it sold to investors. Those investors now can't cash out of what they probably were told were very liquid securities.

Good for Massachusetts. Fidelity should, as they say, join in the solution.

This mess is huge. So far, state and federal regulators have pushed and prodded the big firms to buy back billions, but this doesn't seem to be the end of it.

You can see me on PBS tonight discussing what lessons can be learned from the auction-rate securities market failure. I'll be doing a commentary on The Nightly Business Report, which airs locally on WPBT, Channel 2, starting at 7 p.m.

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It looks like investors who bought auction-rate securities before that market froze in February are no longer flat out of luck.

A multitude of settlements, spearheaded by state regulators, plus some individual company decisions have resulted in plans to buy back almost $37 billion of these securities.

Florida's regulators were crowing over the good news Tuesday, while brokers were telling the trade publication Investment News that they were relieved.

Auction-rate securities were long-term securities whose rates are reset at regular auctions, sometimes weekly. As the credit-crunch that began last summer spread, buyers didn't show up for the auctions anymore. Investors who thought they had purchased something like a money-market fund found themselves unable to cash out.

But it's not entirely over.

Although Citigroup, Merrill and UBS have said they'll buy the securities back for individual investor accounts, the probes continue. This week, St. Petersburg-based Raymond James Financial said it is under investigation by the SEC and the New York attorney general over $1.3 billion in auction rate securities that its brokers had sold.

I can't tell you exactly how to apply for part of the settlement money. That procedure has not been laid out yet.

For more information, look here: http://www.flofr.com/securities/ars.htm

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I’m hearing from so many of you who have money locked up in Auction Rate Securities, which I wrote about in my column last Sunday.

Those were funds that were marketed as a safe substitute for money market mutual funds, but it turns out they were not at all. The long-term bonds these funds invested in suddenly aren’t selling any more. So investors can’t cash out. And they thought they’d bought a liquid investment!

From those whose money is gone I know the shock is great. Some say they were talked out of FDIC-insured certificates of deposit. Some say the yield wasn’t all that good. Some brokers say they had no idea these funds could blow up this way.

On one side, I do believe that honest brokers didn’t mean to sell explosive funds. On the other, I know these readers didn’t know what they were buying, because the explanations were, to be kind, incomplete. And in the middle, is the money lost.

Never, ever ever buy an investment unless you understand it. And never accept the explanation at face value.

The market for auction-rate securities had never before blown up. Just as the market for subprime loans had never before exploded.

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