Boston-based Eaton Vance Management has just received a no-action letter from the SEC that will permit it to provide a new auction-rate security known as Liquidity Protected Preferred Shares, The Wall Street Journal reports.

 

Unlike other auction-rate preferred shares, these new LPPs, would operate based on liquidity backing from an individual bank or a group of banks, and they would pay a dividend rate based on of a rate set by a remarketing agent.On a weekly basis the dividend rate would reset.

 

The letter, sent out last Friday by the Securities and Exchange Commission, comes as a sign of relief to Eaton Vance.Now the firm can safely operate without the fear that the SEC might recommend enforcement or penalize money-market funds that decide to invest in the new LPPs.

 

“The hope is to open up a much larger market for LPPs than ever existed for auction rate preferred shares,” said Payson Swaffield, a Chief Income Investment Officer at Eaton Vance.

 

Although LPPs remain subject to the approval of the board of Eaton Vance Corp, Swaffield added that efforts to seek such authorization would begin “as soon as possible.”

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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