Trust preferred securities are issued by large banks and bank holding companies. The bank opens a trust which is funded with debt. Then the bank carves up shares of the trust and sells them to investors in the form of preferred stock. The resulting stock is called a trust preferred security, or TruPS. It is an important distinction that, when buying a trust preferred security, the investor is buying a portion of the trust and its underlying holdings, not a piece of ownership in the bank itself.
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