ETF News

UPDATE 2-Bank of America: Ready to settle on auction rates

(Adds comment from Cuomo spokesman, bylines)

NEW YORK, Sept 5 (Reuters) - Bank of America Corp BAC.N, said it is ready to settle federal and state probes into the marketing of auction-rate securities, joining eight other companies that reached agreements.

The bank said it has been in talks for nearly a month with the U.S. Securities and Exchange Commission and regulators in New York and Massachusetts on a resolution that would provide “liquidity relief” to customers hurt when the $330 billion market seized up in February.

“We are ready and willing to enter into an agreement that follows the same basic terms of previously announced settlements,” bank spokeswoman Shirley Norton said in a statement Thursday. “We understood that we had reached such an agreement in principle nearly two weeks ago.”

A spokesman for New York Attorney General Andrew Cuomo said on Friday that no deal was set yet. “Our investigation into Bank of America is ongoing,” said the spokesman, Alex Detrick.

“We are still seeking answers to certain questions that have arisen as a result of our initial inquiries. Hopefully, a settlement will be in reach once we have obtained all the relevant information.”

Cuomo was expected to send subpoenas to several Bank of America officials this week, a person familiar with his investigation said earlier this week.

Massachusetts Secretary of State William Galvin threatened on Wednesday to sue Bank of America, saying his office had been unable to settle with the Charlotte, North Carolina-based bank.

Auction-rate debt has rates that reset in periodic auctions. Regulators say brokerages misled investors into believing the debt was safe and the equivalent of cash.

But after the market seized up, tens of thousands of investors could not sell the debt or could only sell it at a loss, according to regulators.

Citigroup Inc C.N, Deutsche Bank AG DBKGn.DE, Goldman Sachs Group Inc GS.N, JPMorgan Chase & Co JPM.N, Merrill Lynch & Co MER.N, Morgan Stanley MS.N, UBS AG UBSN.VX and Wachovia Corp WB.N have settled regulatory allegations tied to how auction-rate debt was sold.

The eight companies agreed to buy back more than $44 billion of the securities and pay in excess of $520 million of fines and penalties.

A 12-state task force is also examining auction-rate practices in the industry.

On Wednesday, federal prosecutors charged two former Credit Suisse Group AG CSGN.VX brokers with fraud and conspiracy over the sale of subprime debt tied to auction-rate securities. One of the brokers pleaded innocent, while the FBI took the other into custody Thursday to face charges.

Bank of America shares closed Thursday at $30.60 on the New York Stock Exchange. They began the year at $41.26. (Editing by Jeffrey Benkoe)