Glossary of Municipal Securities Terms

TRANSFERRED PROCEEDS

Under the Internal Revenue Code, unspent proceeds of a refunded issue that are allocated to a refunding issue when the proceeds of the refunding issue are used to pay the principal of the refunded issue. When refunded proceeds are “transferred” or allocated to a refunding issue, the refunded proceeds and any investments become subject to yield restriction and rebate at the yield on the refunding issue or yield reduction payments in lieu of rebate (sometimes referred to as a “transferred proceeds penalty”). See: ARBITRAGE REBATE; YIELD RESTRICTION.

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