There is an estimated $50 billion in ARS among banks and hedge funds, Robak said. Some industry estimates noted that by early 2008, the ARS market had grown to more than $200 billion held mostly by high net worth individuals and institutional investors. Credit unions were much smaller players, Robak discovered. While there are no hard figures on their ARS holdings, he said his firm knows of at least $2 billion.

On the banking side, ARS were sold as cash management tools to large and small companies that wanted a safe or liquid money market-like instrument with a better yield, Robak said. They were also sold to high net worth franchises.

"In both cases, buyers assumed they were getting close to cash. It led to a lot of lawsuits," Robak said. "When the market froze, it turned out to be as liquid as granite."

Indeed, big banks like Citigroup, Morgan Stanley and Merrill Lynch were hit with class action lawsuits with claims that the ARS were presented as cash alternatives. The Securities and Exchange Commission stepped in and by August 2008, six banks settled and agreed to repurchase outstanding ARS from their individual investors.

The good news for credit unions is that they were mainly holders of ARS while the market was still liquid, Robak said. Still, those who dipped into the pool are trying to recover like every other investor.

"They are the victims. They bought them at par thinking they were like cash. When they realized it wasn't cash, that's when things went south," Robak said.

Credit unions, like some, bought ARS at a discount, Robak recalled. If an investor buys them at a deep enough discount, they can get a pretty good yield, he pointed out. Further, if they are bought at a discount and they are bought out or repaid at some point as par, a nice appreciation could be the outcome, he added. Pluris has heard from a few credit unions seeking valuation assistance.

The firm conducted a survey of ARS holders using financial data as of June 30, 2010. It found 348 holders of ARS, with the holdings having a total par value of $12.85 billion. The survey also found that 299 firms had adjusted down the value of these investments while 49 firms still accounted for their ARS holdings at par value. The aggregate impairment amount for the 299 firms with impaired holdings totaled $2.6 billion, and included both temporary and other-than-temporary impairments.

Robak said the data showed that illiquidity in the ARS market continues to impact the majority of the firms holding these securities that were once characterized as short-term and cash-like.

"Although most firms realized the impact of these failures back in 2008 and early 2009, a small percentage of companies are continuing to mark their holdings at par. This practice is surprising, as companies have had time to recognize the connection between liquidity and security value," Robak said.

While many investors might have once thought of impairment as something that only results from deterioration in credit quality or an increase in default risk, there is no reason to not associate a reduction in liquidity with a drop in value now, Robak said.

"The secondary market for ARS is getting more active. People who marked securities to market price are now marking them up."