Massachusetts subpoenaed UBS, Merrill Lynch and Bank of America for documents and testimony to determine whether the state’s investors were informed that auction-rate securities have risks of becoming illiquid.
Auction-rate securities had been assumed to be a safe and liquid alternative to cash until earlier this year when the auction-rate market started to fail as buyers shied away from the auctions. As a result, many investors have since discovered that their cash is frozen in the auction-rate market.
The auction-rate securities in question are primarily preferred shares in closed-end mutual funds and Massachusetts is seeking information from nine asset managers on their experiences with the funds. Many closed-end funds are making an effort to untie their investors from the securities.
In addition, the state is investigating whether these investments were suitable for those investors. Massachusetts is looking at major investment banks, which sold those securities, to understand the role they played in the events that caused the auctions to fail.
No comments:
Post a Comment