Securities News Releases

Thursday, April 10, 2008
Contact: Ryan Hobart, (573) 526-4734

Carnahan Launches Investigation into Auction Rate Securities Sales

Missouri Secretary of State Robin Carnahan’s Securities Division is investigating practices used by large broker-dealer firms to sell auction rate securities.

Attention to this issue rose as Secretary Carnahan’s office received complaints from several investors who were unable to access their money invested in auction rate securities.  As part of the investigation, officials will review information from brokerage firms related to their marketing practices for auction rate securities.

“Missourians need to double-check promises made about investments they are unfamiliar with,” said Carnahan. “Auction rate securities and other investments are complicated, and if you are unsure about an offer or feel you are being misled, don’t be afraid to ask more questions or report suspicious activity to my office.”

Auction rate securities are often touted as being like cash deposits or money market accounts. Yet, information from investigations suggests that some investors transferring their money out of cash deposits or money markets into auction rate securities are finding that they are unable to access their money when they need it most.

Auction rate securities may provide higher interest rates than Treasuries or FDIC-insured money market accounts, making them attractive when interest rates are dropping.

However, due to fallout from tight credit markets spurred by the sub-prime mortgage crisis, many auctions where auction rate securities are traded have failed.  As a result, several investors who needed immediate access to their money have discovered that it is not available to them. Some investors shut out from their money did not even know that they had invested in auction rate securities.

Investors who have encountered trouble with their auction rate securities, or who are unable to access their investment funds as promised, can call the Missouri Securities Division at their toll-free hotline at (800) 721-7996 to file a complaint.

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