arpholder

Auction Rate Securities: Who's To Blame?

MIchael, you have no idea how these securities were sold. We gave our broker instructions to buy short term AAA rate municipal bonds and corporate paper. We were told that these were AAA rate corporate and municipal bond funds that were "redeemable" every 7 days like money market funds. However, you had only weekly liquidity. There was no mention of auctions. No prospectus. We bought frequently one year cds, short term treasuries, and AAA rate municipal bond funds redeemable "weekly". We correspond this in writing and by email frequently. Near the end--these securities had maybe a 50 basis point advantage over cds and treasuries. There was never a mention of a fixed rate ceiling. Everytime you buy a share of stock or a one year AAA rate municipal bond fund--you cannot read the entire prospectus. It is not practical. if everyone did that on these very simple transactions--the market would grind to a halt. It was very hard to even find the prospectus even after the collapse.