Preferred stock/bond with no market? I want out

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
dogpaddle
Posts: 6
Joined: Tue May 05, 2020 3:51 pm

Preferred stock/bond with no market? I want out

Post by dogpaddle » Tue May 05, 2020 6:13 pm

I've posted an update#1 below on June 30th
-----------------
Goal: I want to get out of investments I do not understand. In my IRA I hold some things related to the bankruptcy of Lehman brothers labeled as "Escrow LB Par Value". It has been described to me by my account manager as like a bond or preferred stock. I want to be rid of these.

Problem: I asked about liquidating these and was told there is no market for them. He had his team request bids and none were received. He suggested trying again in a month. I have an IRA with a different company (Fidelity) and asked about these Lehman items. I was told Fidelity could not sell them or even receive/hold them if I moved the IRA to Fidelity.

What can I do with these? I suspect they are worth under $100 and might even cost more to sell than they are worth. Is it possible to just throw them away? What would happen if I just closed the account with them unsold?
Last edited by dogpaddle on Tue Jun 30, 2020 2:11 am, edited 1 time in total.

retired@50
Posts: 3052
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Preferred stock/bond with no market? I want out

Post by retired@50 » Tue May 05, 2020 7:27 pm

dogpaddle wrote:
Tue May 05, 2020 6:13 pm
Goal: I want to get out of investments I do not understand. In my IRA I hold some things related to the bankruptcy of Lehman brothers labeled as "Escrow LB Par Value". It has been described to me by my account manager as like a bond or preferred stock. I want to be rid of these.

Problem: I asked about liquidating these and was told there is no market for them. He had his team request bids and none were received. He suggested trying again in a month. I have an IRA with a different company (Fidelity) and asked about these Lehman items. I was told Fidelity could not sell them or even receive/hold them if I moved the IRA to Fidelity.

What can I do with these? I suspect they are worth under $100 and might even cost more to sell than they are worth. Is it possible to just throw them away? What would happen if I just closed the account with them unsold?
I suppose if you were to initiate an IRA account transfer to Fidelity, then the current custodian would have either sell them or transfer them to Fidelity. If Fidelity refuses to "receive" them, I suppose someone, somewhere, in the custodial chain would have to figure out a way to get rid of them. I've actually never heard of a security so "unmarketable" that nobody would buy it. This fact alone would give you a strong argument to complain to the current custodian / account manager.

If it wasn't your idea to buy these investments, then who's idea was it?
Maybe that person would be willing to buy them... Best of luck.

Regards,
This is one person's opinion. Nothing more.

User avatar
Ralph Furley
Posts: 66
Joined: Fri Nov 29, 2019 10:42 am

Re: Preferred stock/bond with no market? I want out

Post by Ralph Furley » Tue May 05, 2020 7:34 pm

I was curious and here's what I found: https://www.costbasis.com/reorgs/lehmanbros.html

Interesting.

User avatar
CAsage
Posts: 1762
Joined: Sun Mar 27, 2016 6:25 pm

Re: Preferred stock/bond with no market? I want out

Post by CAsage » Tue May 05, 2020 7:35 pm

What would happen if you move/sell everything else, and just abandon those? That might be cheapest.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

Northern Flicker
Posts: 5874
Joined: Fri Apr 10, 2015 12:29 am

Re: Preferred stock/bond with no market? I want out

Post by Northern Flicker » Tue May 05, 2020 7:45 pm

A pitfall to watch out for is if they are distributed in-kind from an IRA you could get a 1099 reporting a distribution of some value and have to go through some possibly painful process of establishing that they contribute zero value to a taxable distribution. Just abandoning them in an IRA will just kick the can down the road until mandatory distributions are required.
Risk is not a guarantor of return.

retired@50
Posts: 3052
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Preferred stock/bond with no market? I want out

Post by retired@50 » Tue May 05, 2020 7:52 pm

Northern Flicker wrote:
Tue May 05, 2020 7:45 pm
A pitfall to watch out for is if they are distributed in-kind from an IRA you could get a 1099 reporting a distribution of some value and have to go through some possibly painful process of establishing that they contribute zero value to a taxable distribution. Just abandoning them in an IRA will just kick the can down the road until mandatory distributions are required.
This raises an interesting question.
If OP leaves these hard-to-sell securities as the only item in his IRA, when he tries to take an RMD they'll either send him nothing, or sell them for him, wouldn't they?

Regards,
This is one person's opinion. Nothing more.

Topic Author
dogpaddle
Posts: 6
Joined: Tue May 05, 2020 3:51 pm

Re: Preferred stock/bond with no market? I want out

Post by dogpaddle » Tue May 05, 2020 9:54 pm

Ralph Furley wrote:
Tue May 05, 2020 7:34 pm
I was curious and here's what I found: https://www.costbasis.com/reorgs/lehmanbros.html

Interesting.
Thank you for the link

Topic Author
dogpaddle
Posts: 6
Joined: Tue May 05, 2020 3:51 pm

Re: Preferred stock/bond with no market? I want out

Post by dogpaddle » Tue May 05, 2020 10:15 pm

retired@50 wrote:
Tue May 05, 2020 7:52 pm
Northern Flicker wrote:
Tue May 05, 2020 7:45 pm
A pitfall to watch out for is if they are distributed in-kind from an IRA you could get a 1099 reporting a distribution of some value and have to go through some possibly painful process of establishing that they contribute zero value to a taxable distribution. Just abandoning them in an IRA will just kick the can down the road until mandatory distributions are required.
This raises an interesting question.
If OP leaves these hard-to-sell securities as the only item in his IRA, when he tries to take an RMD they'll either send him nothing, or sell them for him, wouldn't they?

Regards,
I definitely don't want to distribute in-kind or get complicated tax forms. They currently only show adding value of about $50 to the account for calculating my RMDs.

I might combine CAsage's idea and yours. I could move/sell everything else and then just close the account to force a liquidation, taking whatever comes as part of this years RMD. If it can't be liquidated, I could just walk away from the account.

Is there any reason they could deny me closing an account?

Thanks everyone

pkcrafter
Posts: 14109
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Preferred stock/bond with no market? I want out

Post by pkcrafter » Wed May 06, 2020 8:57 am

dogpaddle wrote:
Tue May 05, 2020 6:13 pm
Goal: I want to get out of investments I do not understand. In my IRA I hold some things related to the bankruptcy of Lehman brothers labeled as "Escrow LB Par Value". It has been described to me by my account manager as like a bond or preferred stock. I want to be rid of these.

Problem: I asked about liquidating these and was told there is no market for them. He had his team request bids and none were received. He suggested trying again in a month. I have an IRA with a different company (Fidelity) and asked about these Lehman items. I was told Fidelity could not sell them or even receive/hold them if I moved the IRA to Fidelity.

What can I do with these? I suspect they are worth under $100 and might even cost more to sell than they are worth. Is it possible to just throw them away? What would happen if I just closed the account with them unsold?
Your "account manager" put you into these things? He needs to be fired and reported.

https://www.finra.org/investors/have-pr ... int-center

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

User avatar
galawdawg
Posts: 851
Joined: Thu Dec 14, 2017 12:59 pm
Location: Georgia

Re: Preferred stock/bond with no market? I want out

Post by galawdawg » Wed May 06, 2020 9:21 am

pkcrafter wrote:
Wed May 06, 2020 8:57 am

Your "account manager" put you into these things? He needs to be fired and reported.

https://www.finra.org/investors/have-pr ... int-center

Paul
Perhaps the OP originally held Lehman stock and what he has now is the result of the Lehman bankruptcy.

User avatar
galawdawg
Posts: 851
Joined: Thu Dec 14, 2017 12:59 pm
Location: Georgia

Re: Preferred stock/bond with no market? I want out

Post by galawdawg » Wed May 06, 2020 9:25 am

Here is an email address associated with the latest SEC filing in the matter, submitted 1/13/2020, https://sec.report/Document/0001193125-20-006094/, where questions can be directed: questions@lehmanholdings.com

You may be able to surrender your interest.

Alternatively, does your brokerage that currently holds your non-transferable interest in the Lehman Bros. Trust charge any fees or require a minimum balance? If not, your thought about transferring everything else out and simply ignoring or "abandoning" the Lehman Trust holding may be your best approach. You just want to be sure that you aren't assessed minimum balance or other fees by your holding brokerage which they then attempt to collect from you.

not4me
Posts: 864
Joined: Thu May 25, 2017 3:08 pm

Re: Preferred stock/bond with no market? I want out

Post by not4me » Wed May 06, 2020 12:02 pm

I didn't see where your IRA was, but I'd call them and ask for ideas. I don't recall seeing it done before in a IRA, but some brokers will actually buy a similar worthless asset for $1. Outside an IRA, you can then use as capital loss. Inside, I assume no impact -- including no more harm than trashing it. If you are already taking distributions, you might be able to get it distributed in-kind & then donate. I'd find a willing charity before trying & would use your brokerage statement to place a value on it. I expect many wouldn't take it, but then again some may feel they are no worse off.

Northern Flicker
Posts: 5874
Joined: Fri Apr 10, 2015 12:29 am

Re: Preferred stock/bond with no market? I want out

Post by Northern Flicker » Wed May 06, 2020 3:19 pm

Distributing it in-kind to dispose of it is a reasonable idea especially if you can guarantee it will be valued at $50 or less for the distribution.

Once it is in a taxable account, there should be better options, but donating it to push the problem off on a non-profit organization doesn’t not seem like the best idea.
Risk is not a guarantor of return.

Topic Author
dogpaddle
Posts: 6
Joined: Tue May 05, 2020 3:51 pm

Re: Preferred stock/bond with no market? I want out

Post by dogpaddle » Thu May 07, 2020 4:08 pm

galawdawg wrote:
Wed May 06, 2020 9:21 am
Perhaps the OP originally held Lehman stock and what he has now is the result of the Lehman bankruptcy.
Correct, it was originally pre-bankruptcy Lehman

There are annual account fees for the IRA. It appears there will be an ACAT fee to transfer out the non-lehman assets, and additionally an IRA closing fee. I guess I will just eat all that.
Last edited by dogpaddle on Thu May 07, 2020 4:20 pm, edited 1 time in total.

Topic Author
dogpaddle
Posts: 6
Joined: Tue May 05, 2020 3:51 pm

Re: Preferred stock/bond with no market? I want out

Post by dogpaddle » Thu May 07, 2020 4:18 pm

Northern Flicker wrote:
Wed May 06, 2020 3:19 pm
Distributing it in-kind to dispose of it is a reasonable idea especially if you can guarantee it will be valued at $50 or less for the distribution.

Once it is in a taxable account, there should be better options, but donating it to push the problem off on a non-profit organization doesn’t not seem like the best idea.
Perhaps I am mistaken about distributing in-kind. Wouldn't I first need to find a custodian that could even hold it? Fidelity said they can't. Chase Private Client said no in the past as well.

User avatar
LilyFleur
Posts: 1274
Joined: Fri Mar 02, 2018 10:36 pm

Re: Preferred stock/bond with no market? I want out

Post by LilyFleur » Thu May 07, 2020 4:48 pm

You could try using an experienced advisor at Fidelity to rollover the entire IRA to Fidelity. Doesn't Fidelity give you a free once-a-year meeting with an advisor? Do the meeting and bring it up then and ask the tough questions and let them research it and get back to you with a plan that sounds reasonable.

I have found Schwab very eager to help any time I want to invest more money with them. I sat with my advisor and he helped me fill out the Inherited IRA paperwork to move it to Schwab. (Pre-COVID)

dru808
Posts: 839
Joined: Sat Oct 15, 2011 2:42 pm
Location: mid pac

Re: Preferred stock/bond with no market? I want out

Post by dru808 » Thu May 07, 2020 4:53 pm

I’m curiously keeping tabs on this. Please let us know the outcome.
60% US equity | 25% International equity | 15% US Treasury bonds

Oregano
Posts: 92
Joined: Fri Nov 22, 2019 9:30 pm

Re: Preferred stock/bond with no market? I want out

Post by Oregano » Fri May 08, 2020 4:27 pm

I don't think escrowed securities can be sold or transferred, so it's curious that the broker requested bids. You have a holding that may have some modest value, so just leave it be. I have had such positions before and they can sit there for many years. I understand the idea of cleaning up the portfolio, but it doesn't hurt you to have it sit there and possibly give you more money at some point.

Topic Author
dogpaddle
Posts: 6
Joined: Tue May 05, 2020 3:51 pm

Re: Preferred stock/bond with no market? I want out

Post by dogpaddle » Tue Jun 30, 2020 2:09 am

dru808 wrote:
Thu May 07, 2020 4:53 pm
I’m curiously keeping tabs on this. Please let us know the outcome.
Update#1: I tried, but have been unable to dispose of the Lehman bankruptcy items. Possibly I have created a couple headaches in my future. This post is to record what I've learned in case someone searches the forum in the future.

After getting nowhere with my UBS account manager for two weeks, I transferred in-kind most of the IRA to Fidelity. The account at UBS now only has the two Lehman CUSIPs. I have a family member who uses UBS for their IRA so I asked about gifting or selling the shares to them. Weeks later when I finally got a response from account manager I was told this is impossible/illegal because we were covering both sides of the trade (or something to that effect). This wouldn't work even if the account manager requested bids from the market again, my family would submit a bid for $1 to the market, and being the only bid I would accept. So I gave up and transferring it.

Next I attempted to force a sale by trying to take a RMD. The shares are listed at a value of $50 and the IRS will want their cut. I was told I could not take an RMD because there was no market to sell the CUSIPs. For this year I would need to take all my RMD from what I moved to Fidelity. In future years I will need to mentally add this $50 to the Fidelity account before calculating my RMD. Quite the annoyance for next year.

Lastly I asked about just closing the account. The annual fee is more than the $50 "value" of the IRA. Again this is not possible because there is no market to sell. I was told the account manager has now made this a non-billed account that will last until the Lehman bankruptcy is complete. Only then can I close it.

So for now my attempt to simplify has gained me an additional account and some yearly math homework. I was able to rebalance allocations at Fidelity with no giant commissions, so at least I have that going for me.

Post Reply