UPDATE 1-Cuomo, SEC in auction-rate pacts with brokerages

(Adds SEC settlements with 3 banks)

By Jonathan Stempel

NEW YORK, June 3 (Reuters) - New York Attorney General Andrew Cuomo said six major banks have satisfied the terms of settlements over their sale of auction-rate debt that became illiquid despite being marketed as being as safe as cash.

The assurances of discontinuance with units of Bank of America Corp (BAC.N), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Morgan Stanley (MS.N), as well as Royal Bank of Canada's (RY.TO) RBC Capital Markets, follow settlements last summer over the February 2008 seizing up of the $330 billion auction-rate market.

Bank of America, Deutsche Bank and RBC also entered final settlements in related U.S. Securities and Exchange Commission cases, providing for the reimbursement of nearly $6.7 billion to about 9,600 customers.

Auction-rate debt has rates that reset in periodic auctions, but regulators accused brokerages of misleading investors into using the debt as a cash substitute. After the market froze when dealers stopped taking part in auctions, many investors could sell the debt only at a loss or not at all.

Cuomo on Wednesday said 11 securities firms have agreed to buy back more than $61 billion of the debt, and that his latest agreements detail how banks have and will continue to provide liquidity. The settlements have also resulted in several hundred million dollars of fines.

"Our goal has been to give investors relief from the collapse of the auction-rate securities market, which is exactly what these deals do," he said in a statement.

Wachovia Corp's brokerage unit, now part of Wells Fargo & Co (WFC.N), has also entered an assurance of discontinuance, Cuomo said in February.

Several other state regulators have been involved in auction-rate settlements. Investigations by Cuomo and other regulators are still ongoing, and California in April sued Wells Fargo over alleged auction-rate abuses. (Reporting by Jonathan Stempel, additional reporting by Julie Vorman in Washington; Editing by Dave Zimmerman, Phil Berlowitz)