Wednesday, June 4, 2008
Auction Rate Securities Hell
Fund managers are seeking regulatory approval for a new type of security in an attempt to break the deadlock in parts of the $300bn auction rate securities market, which collapsed four months ago. The new security has been devised by closed-end fund managers, which in the past have issued more than $60bn in auction rate preferred shares (ARPs) and are facing complaints from investors who cannot trade them. The auction rate securities issued by closed-end funds are referred to as auction rate preferred shares, but have the same structure.