SIFMA & Auction Rate Securities (ARS)
Latest Release
September 18, 2008
SIFMA Testifies on Auction Rate Securities Before House Financial Services Committee
- Read Testimony of Leslie Norwood, SIFMA managing director and associate general counsel before the House Financial Services Committee hearing on the auction rate securities market
July 9, 2008
NASD Rule 2110 and NYSE Rule 402.30 — Partial Redemption
Allocations and Disclosure Practices in Auction Rate Securities
FINRA staff issued this memorandum to clarify certain questions that have arisen after the issuance of Regulatory Notice 08-21 (the Notice), in which FINRA provided guidance to its members on partial redemptions of auction rate securities.
June 13, 2008
IRS Notice 2008-55 on Auction Rate Preferred Securities
IRS Notice 2008-55 provides guidance regarding the effect of adding certain liquidity facilities to support certain auction rate preferred stock on the equity character of the stock for Federal income tax purposes. This Notice provides administrative relief in furtherance of public policy in light of special liquidity needs in the auction rate securities market as a result of recent significant auction failures in this market.
June 13, 2008
SEC's No-Action Letter to Eaton Vance regarding Auction Rate Preferred Securities
June 12, 2008
FINRA Regulatory Notice 2008-30: Guidance Relating to Illiquid Investments
FINRA is providing guidance to member firms on obligations that may arise in connection with customer requests to sell generally illiquid securities and informing customers of buy interest in such securities.
May 5, 2008
Auction Rate Securities: What Happens When Auctions Fail
This FINRA Investor Alert lets investors know about some of the options available to them in the event their ARS investment becomes illiquid. It also helps investors to understand what can happen when an issuer makes a call for a partial redemption.
May 2, 2008
Federal Reserve Expands Eligibility for Term Securities Lending Facility (TSLF)
The Federal Open Market Committee authorized an expansion of the collateral that can be pledged in the Federal Reserve's Schedule 2 Term Securities Lending Facility (TSLF) auctions. Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations.
SIFMA and ASF submit letter to Fed regarding SLABS eligibility for TSLF
April 30, 2008
FINRA Issues Guidance to Broker-Dealers on Partial Redemptions of Auction Rate Securities
In response to current market conditions, some issuers are offering partial redemptions of auction rate securities. This Notice reminds firms that when allocating partial redemptions of auction rate securities among their customers, they must adopt procedures that are reasonably designed to treat customers fairly and impartially, and must put their customers’ interests ahead of their own.
April 24, 2008
Update to the April 11, 2008, Interpretive Letter: Auction Rate Preferred Securities
Update to the temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable ARPS. This update modifies the requirement to obtain secured bank loans for credit extended to customers collateralized by ARPS.
April 22, 2008
SIFMA Supports Increasing Information Available for Auction Rate Securities
The Securities Industry and Financial Markets Association (SIFMA), in a comment letter filed with the Municipal Securities Rulemaking Board (MSRB), expressed its strong support for the MSRB’s proposal to develop a website which would display information on the results of auctions of auction rate securities.
April 16, 2008
Municipal Bond Credit Report
This month's report includes "The Municipal Bond Credit Report" and "The Auction Rate Securities Market."
Approximately each month, this publication will feature a selection of articles on the securities industry, securities markets, operational issues and managerial topics of interest to securities and financial services industry senior management, policymakers, academics, and investors among others. Also included is a statistical review of monthly activity in the US primary and secondary capital markets and related economic statistics. Research Reports now includes the Research Quarterly.
April 11, 2008
Auction Rate Preferred Securities
FINRA granted temporary relief to the 100 percent net capital charge for non-purpose loans made to customers that are collateralized by auction rate preferred securities. Find here
April 8, 2008
Clarification Memo Regarding SEC No-Action Letter of March 14, 2008
On March 18, 2008 and March 2008, SIFMA met with the SEC to get clarification on certain points in the SEC No-Action Letter dated March 14, 2008 regarding auction rate securities.
April 2, 2008
SIFMA and ASF submit letter to Fed regarding SLABS eligibility for TSLF
SIFMA and the ASF jointly submitted a letter to the Federal Reserve Board and the Federal Reserve Bank of New York requesting that the definition of program-eligible collateral (which currently includes RMBS and CMBS among other collateral) for the Term Securities Lending Facility (TSLF) be expanded to include triple-A rated FFELP and private student loan asset-backed securities. Additional information regarding the TSLF may be found here.
March 25, 2008
View Notice 2008-41
This IRS and Treasury Notice clarifies, amends, supplements, and supercedes Notice 2008-27. (below)
It is intended to provide greater certainty and flexibility to address certain potential federal tax issues that have arisen in the tax-exempt bond market as a result of recent rating agency downgrades of major municipal bond insurers and failures of auctions in the auction-rate bond sector of the tax-exempt bond market.
March 14, 2008
SIFMA Commends SEC for Auction Rate Securities Guidance
SIFMA issued a statement on the Securities and Exchange Commission’s guidance regarding dealer and issuer involvement in the auction rate securities market.
February 13, 2008
View Notice 2008-27
IRS and Treasury Release Guidance on Reissuance Standards for State and Local Bonds and SIFMA Letter submitted to the Treasury Department regarding proposed changes to the reissuance rules for tax-exempt securities
September 27, 2007
The Securities Industry and Financial Markets Association (SIFMA) today announced that it has developed model auction agency and broker-dealer agreements for use with auction rate securities. In addition, SIFMA has updated its previously issued model auction procedures, note to bond counsel and standard disclosure language regarding the role of the broker-dealer in auctions.
These model documents and procedures embody certain principles in SIFMA’s Best Practices for Auction Rate Securities, which were finalized in April 2007.
Auction rate securities are floating-rate securities whose interest or dividend rate is periodically reset by an auction. During the auction, investors indicate their interest in continuing to hold, purchase or sell the securities at specified rates to broker-dealers, who then submit the bids to an auction agent. The auction agent determines the lowest rate that will result in the sale of all securities being auctioned. This rate is known as the clearing rate. In the event that the auction agent fails to provide the auction rate, a different rate will be established.
Auction Rate Securities Model Documents
- Model Auction Procedures
- Auction Agency Agreement
- Broker Dealer Agreement
- Sample Disclosure Language
- Note to Bond Counsel
SIFMA’s Best Practices for Auction Rate Securities
Market Data:
Market Size Estimates as of 2/27/08 |
|
| Variable Rate Demand Notes | $375 billion |
| Tender Option Bonds | $200 billion |
| Auction Rate Securities | $300 billion |