Auction-Rate Securities Called ‘Cash Alternatives’
Until this past May, auction-rate securities were classified as “Cash alternatives/Municipal securities” on the customer statements issued by UBS Financial Services.
And well into March, Merrill Lynch customers who checked their accounts online found their auction-rate securities investments listed under “Other Cash.”
The classifications were disclosed in a recent Boston Globe article written by reporter Beth Healy titled: “Brokerage practices draw criticism – Clients say they were misled about risks of auction-rate debt.”
The recent revelations further support the claim that investors were told auction-rate securities were “same as cash.” For many of the investors, that claim was the very reason they chose auction-rate debt. The investors were looking for a safe, short-term place to park their money before drawing on it for expenses such as college tuition, house purchases, impending retirement and even daily living expenses.
Auction-rate securities are municipal or corporate debt securities or preferred stocks that pay interest at rates set through periodic auctions. The instruments typically have long-term maturity dates or no maturity date.
In mid-February, the auctions for the investment instruments failed. That meant investors were unable to sell their securities. To this day, auction-rate securities investors find themselves owning frozen assets.
Auction-rate securities investors who wish to discuss their rights against any broker-dealer may contact Carey & Danis toll-free at 800-721-2519 or fill out our online contact form
