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Mass. Subpoenas Banks Over Auction-Rate

Mass. Subpoenas Banks Over Auction-Rate
Friday March 28, 2:33 pm ET
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Massachusetts Subpoenas Banks on Auction-Rate Securities

NEW YORK (AP) -- Massachusetts has subpoenaed three big investment banks to determine whether investors were properly informed of the risks of auction-rate securities, a state official said Friday.

Massachusetts Secretary of the Commonwealth William F. Galvin said his office issued the subpoenas to UBS AG, Merrill Lynch & Co. and Bank of America Corp.

The auction-rate securities in question are primarily preferred shares in closed-end mutual funds. Last month, Galvin sought information from nine asset managers on their experiences with closed-end funds in the wake of auction failures in the auction-rate securities market.

"Within the last couple of weeks, my office has received many calls from people who thought they were investing in safe, liquid investments only to find that they had, in fact, purchased auction market securities that are now frozen and they cannot get their money." Galvin said.

The state is also investigating whether these investments were suitable for those investors. In addition, the state is looking into the role that the major investment banks which sold those securities had in the events that caused the auctions to fail.

Numerous closed-end funds are trying to help their investors get out of the securities.


LINK: http://biz.yahoo.com/ap/080328/banks_subpoenas.html?.v=1