by Calculated Risk on 3/28/2008 04:13:00 PM

From the WSJ: UBS Cutting Value Of Auction-Rate Securities In Brokerage Accounts

... UBS AG is marking down the value of the securities in its brokerage customers' accounts.

Until now, customers who were unable to sell securities in regularly scheduled auctions were told that the securities retained full value and would receive higher interest rates.

UBS ... will mark them down this afternoon and inform clients via their online statements shortly thereafter ... The markdowns will range from a few percentage points to more than 20% ...

I know investors in ARS, and their banks have been telling them they can't sell - but their principal is safe - it is just a liquidity problem. UBS is telling their customers they can't sell, and their principal is no longer safe.