Entry: Did Auction Rate Securities Ever Have A Natural Success Rate?

posted by thoffman

Mar 05, 2008 9:42AM

I am the owner of preferred auction rate shares in a Van Kampen Massachusetts muni fund. Realistically speaking, these shares will never trade again (if they ever did, without the active involvement of the brokers), because no sane person would purchase them after learning about their history, the past conduct of the brokers, the 2006 FASB changes, and the severe liquidity risk. Therefore, the whole concept and mechanism of the fund has broken down, both for preferred and common, and will never function again. Meanwhile, the fundamental assets of the fund are in good shape. It is the fund itself which is the problem. Under these circumstances, Massachusetts state law suggests that the fund should be liquidated. Has anyone thought about this? Also, does anyone have any ideas how I will be able to identify the other preferred shareholders, who are probably only a few hundred in number? Obviously, my broker Merril Lynch will not provide this information because they are afraid of litigation against them. The fund itself does not know who the ultimate owners are, because the shares are held in the name of the brokers. This is kind of a nasty situation, legally speaking.