Auction Rate Securities Fraud Lawyer

What are Auction Rate Securities?

Auction-rate securities are long-term bonds that resemble short-term debt. They are most often municipal bonds, corporate bonds, or preferred stocks and are commonly issued by municipalities, tax-exempt institutions, and closed-end mutual funds. Investors of Auction Rate Securities frequently receive interest rates that are reset at successive auctions which range from every 7 days to every 35 days. A bidder states the lowest interest rate that he is willing to accept to buy and hold the bond for the next period between auctions. Winning the auction requires the bidder to purchase the bond at par value, but allows the winner to receive interest at the "clearing rate" for as long as the bidder holds the bonds.