FINRA STEPS IN
The Financial Industry Regulatory Authority fined Nuveen Investments $3 million for creating misleading marketing materials for the sale of auction-rate preferred securities. The long-term securities have interest rates or dividend yields reset periodically through an auction process. The preferred shares were issued by closed-end mutual funds to raise money that the funds would invest. Broker-dealers sold the securities to investors, not Nuveen. FINRA said the company neglected in brochures to include the risks that auctions could fail and investments could become illiquid. Further, Nuveen failed to revise disclosures after a lead auction manager of about $2.5 billion of the instruments notified Nuveen that it would stop managing the auctions — and at least a couple failed.
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