Bank of America ready to settle securities probes

Bank of America Corp. said Friday it is ready to settle federal and state investigations into sales of risky auction-rate securities, joining eight other big investment banks that have agreed to buy back a total of more than $50 billion of the securities.

Charlotte, N.C.-based Bank of America, the second-largest U.S. bank by assets, said it has been in negotiations for nearly a month with the Securities and Exchange Commission and authorities in New York and Massachusetts on a possible settlement to buy back the bond-like securities from investors.

"We are ready and willing to enter into an agreement that follows the same basic terms of previously announced settlements," Bank of America spokeswoman Shirley Norton said in an e-mailed message. "We understood that we had reached such an agreement in principle nearly two weeks ago."

"We hope that all of the parties will work towards completing a settlement for the benefit of investors who have been affected by unprecedented market disruptions," Norton said.

The SEC, New York Attorney General Andrew Cuomo and a number of other state regulators have been conducting a wide-ranging investigation into banks' marketing of auction-rate securities. The regulators have alleged that the banks misled customers into believing the auction-rate securities were safe, cash-like investments.

Tens of thousands of investors nationwide — including institutional and individual investors, cities and towns, charities and small businesses — were left holding damaged, illiquid securities when the $330 billion market for auction-rate securities collapsed in mid-February, the regulators say.

In a separate accord with Massachusetts Secretary of State William Galvin announced last week, Bank of America agreed to redeem $43 million in auction-rate securities held by the Massachusetts Turnpike Authority and one of the state's housing agencies.

The banks that have agreed in recent settlements to buy back the securities are a roster of Wall Street powerhouses: Merrill Lynch & Co., Goldman Sachs Group Inc., Deutsche Bank, UBS AG, Citigroup Inc., Morgan Stanley, JPMorgan Chase & Co. and Wachovia Corp.

Alex Detrick, a spokesman for Cuomo, said the attorney general's office sent an additional round of subpoenas seeking information to Bank of America this week.

"Our investigation into Bank of America is ongoing," Detrick said in a statement. "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 we are seeking, but we do have an obligation to follow all the evidentiary trails."

SEC spokesman John Nester declined to comment.

The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt, except the interest rates were reset at regular auctions, some as frequently as once a week. A number of companies invested in the securities because they could treat their holdings almost like cash.

On Wednesday, federal prosecutors and the SEC accused two former Credit Suisse Securities brokers of duping investors into buying more than $1 billion in auction-rate securities by making it look as though they were safe investments backed by federally guaranteed student loans.

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