Forced selling of munis seen as unlikely

Mutual funds might be forced to sell off lower-quality issues that carry a high rating due to insurance.
NOV 16, 2007
By  Bloomberg
A possible downgrade of municipal bond insurers has caused worries that mutual funds might be forced to sell off lower-quality issues that carry a high rating due to insurance. Some tax-free funds are required to hold certain amounts of higher-rated bonds. But observers said forced selling is unlikely. “Some money [from mutual funds] for sure would come out” in the event of a downgrade, said Matt Fabian, a Westport, Conn.-based senior analyst with Municipal Market Advisors. “But not all, because [funds] have different ways of interpreting [guidelines for] what they can hold.” Mutual fund “prospectus language is broadly enough conceived to prevent exactly that type of situation,” said Lawrence Jones, a mutual fund analyst at Morningstar Inc. in Chicago. Mr. Jones said some funds also can temporarily depart from their normal investment policy “in the event of extreme market stress.” This month, Fitch Investors and Moody's Investors Service said they were reviewing the bond insurers due to their exposure to CDOs. For the full report, see the upcoming Nov. 19 issue of InvestmentNews.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.