This is the Invest Ed® Investment Minute;
the voice of investor protection in Oklahoma.
An auction rate security is a bond, or other
debt whose interest rate is not fixed but
is set weekly or monthly by auction.
Investors are told that they can get out of
the bonds by selling them at these auctions.
For over 20 years Wall Street banks acted
as purchasers of these bonds; stepping in,
as a last resort when there were no other
purchasers, to buy these bonds at auctions,
even though Wall Street created and ran these
markets.
In early 2008 however, the banks abandoned
this market leaving thousands of individuals
and pension plans holding bonds they cannot
sell, despite being told these investments
were just like cash and money market funds.
What was not known was that the higher yield
was accompanied by an even higher yet undisclosed
risk.
Education is Protection. Investigate a security
before investing, visit securities.ok.gov.
The Invest Ed® Investment Minute is designed
to educate you about securities fraud.
