In response to investors’ complaints about not being able to sell their auction-rate securities, the state of Missouri is investigating brokerage firms in how they sold these securities to investors.
Auction-rate securities have been sold as safe and liquid alternatives to cash with rates better than traditional money-market accounts. The $330 billion auction-rate collapsed after Wall Street firms, suffering from their own write-downs and losses, stopped rescuing the failed auctions. That left investors with securities no one wanted to buy and debt issuers with high penalty interest rates for failed auctions.
Missouri is advising their investors to review promises made to them by brokerage firms and asking firms for documents on how they marketed the securities.
Missouri is not alone. Massachusetts, FINRA, and the SEC have all taken up action to investigate investor complaints and the sales practice of brokerage firms.
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