UPDATE 1-Regulators ask Stifel to accelerate ARS buyback

* To pay $525,000 fine to be shared by the states

* To pay additional $250,000 to Missouri, $25,000 to Indiana

* To hire independent consultant to review policies

Dec 28 (Reuters) - Investment bank Stifel Financial Corp (SF.N) said its brokerage unit will accelerate repurchase of auction rate securities (ARS) under a deal with state regulators.

The securities, which are held at Stifel Nicolaus & Co Inc by the company's retail investors, will be repurchased by December 2011, six months earlier than previously planned, the company said.

The settlement, reached with regulators in Missouri, Indiana, Colorado and other members of the North American Securities Administrators Association Task Force, includes a $525,000 fine which will be shared by the states and additional payments of $250,000 to Missouri and $25,000 to Indiana.

Auction-rate securities are long-term debt instruments whose interest rates are regularly reset through auctions.

The market froze in February 2008 as the credit crunch took hold, trapping investors and issuers and prompting complaints from investors around the country who were unable to withdraw money from their accounts.

Stifel said the settlement requires it to hire an independent consultant to review the company's supervisory and compliance policies and procedures for non-conventional investments. The settlement is the latest in a string of deals banks across the nation have struck with regulators following the failure of the auction-rate securities market last year.

States, including California, New York and Massachusetts, launched probes of Wall Street practices in the market following allegations they misled clients by assuring them the auction-rate securities were a safe, liquid alternative to cash, certificates of deposit or money market funds.

Shares of the company closed at $58.58 Monday on the New York Stock Exchange. (Reporting by Jochelle Mendonca in Bangalore; Editing by Ratul Ray Chaudhuri)