UBS Securities, Bank of America, and Merrill Lynch Among Firms Subpoenaed In Massachusetts Auction-Rate Market Sales Probe

Massachusetts Secretary of the Commonwealth William Galvin is subpoenaing Merrill Lynch, Pierce, Fenner, & Smith Inc., UBS Securities, and Bank of America Investments because it wants information about the companies’ involvement in selling auction-rate market securities to retail investors. The companies are all registered Massachusetts broker dealers. Galvin issued the subpoenas on behalf of the Massachusetts Securities Division.

The division wants to determine whether the firms followed proper procedures in letting Massachusetts investors know of the possibilities that their investments could become illiquid. The state is also trying to determine what role big investment banks played in causing the auctions to fail and whether the investments sold to retail investors were suitable.

Many of the investors that bought auction market securities cannot get their money because the securities are frozen. Small business owners and individual investors have been especially hurt by the failures in the auction market because of the subprime mortgage collapse.

Galvin says he is not investigating why the securities are frozen but whether the investment firms were in compliance with their sales practices and in disclosing the necessary information to investors.

In February, Galvin subpoenaed Calamos Financial Services, Blackrock Financial Management, Pioneer Investment Management, Nuveen Asset Management, MFS Investment Management, John Hancock Advisers, Allianz Global Investors, Evergreen Investment Management, and Eaton Vance for information about the asset management companies’ dealings with closed-end funds following the auction failures in the auction-rate securities market.

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Related Web Resources:

Galvin issues subpoenas in debt securities probe,, March 28, 2008
Another Kick in the ARS,, February 22, 2008
Massachusetts Securities Division