NY attorney general subpoenas UBS over auction rate debt

NEW YORK (Reuters) - UBS AG (UBSN.VX) has received subpoenas from the New York attorney general, Andrew Cuomo, delving into how it handled auction rate debt, a $330 billion market that seized up in late January, a source who had seen the document said on Thursday.

The "wide-ranging" probe delves into, for example, how auctions were handled and how the debt was sold, explained the source, who requested anonymity.

UBS declined comment on the probe into this kind of debt, which has a long-term maturity but whose interest rates are reset at periodic auctions.

Thursday's Bond Buyer, a daily trade publication, said other banks that received subpoenas included Merrill Lynch MER.N and JPMorgan Chase (JPM.N).

A Merrill spokesman said the company, as a matter of policy, did not comment on regulatory matters but cooperated with investigators when asked to do so.

Spokesmen for the Democratic attorney general and JPMorgan were not immediately available.

A few months ago, investors flooded dealers with too much auction rate debt because they feared the insurers that guaranteed it were no longer credit-worthy. This caused the auctions to fail because there were too few buyers, trapping investors who needed their cash.

(Reporting by Joan Gralla; Editing by James Dalgleish)