The Financial Industry Regulatory Authority issued an alert yesterday that outlined options for investors who need cash but hold illiquid auction-rate securities in the wake of failed auctions that have followed downgrades of bond insurers stemming from the subprime mortgage crisis.

FINRA pointed out that most investors who purchased ARS were typically seeking a cash-like investment that paid a higher yield than money market mutual funds or certificates of deposit. They purchased either bonds with long-term maturities and interest rates that were variable or preferred shares with cash dividends that were variable. The variable rates were reset periodically through auctions.

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