Galvin Seeks Info. On Bond Auctions
Massachusetts' top securities regulator asked nine financial services firms for information Wednesday about the recent trouble finding buyers for investments that local governments rely on to raise cash for public projects.
Secretary of State William Galvin said he wanted his office to learn more about the rapidly growing number of cases in which bonds known as auction-rate securities have failed to yield buyers at auctions where the investments are sold.
Financial turmoil triggered by the deterioration of the subprime housing market has left investors increasingly wary of the risks of investments such as auction-rate securities, which were once considered safe.
Hundreds of auctions have failed to yield buyers this month, driving up the interest rates for securities that do sell in the $330 billion auction-rate securities market.
The failures have left short-term financing for some public projects in jeopardy, and made it more expensive for municipalities to raise money through bond sales for everything from water projects to road work and hospital expansions.
Galvin wrote the nine firms letters asking them to disclose what they have told investors about the consequences of auction failures and what complaints they have received.
Galvin said his office sent letters to Eaton Vance; Evergreen Investment Management; Allianz Global Investors; John Hancock Advisers; MFS Investment Management; Nuveen Asset Management; Pioneer Investment Management; Blackrock Financial Management; and Calamos Financial Services. Galvin is seeking a response from each firm by March 7.
Last week, the Municipal Securities Rulemaking Board, which regulates U.S. municipal bonds, said it may intervene to force greater transparency in the auction-rate securities market.
The group also said it was considering asking investment firms that package the securities for sale to investors to share information about the recent problems. (AP)
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