CHICAGO — Citigroup Global Markets Inc. and divisions of Wachovia Bank have agreed to buy back up to $876 million of auction-rate securities held by Michigan investors and will pay the state a $2.4 million administrative fine, state regulators announced this week.
The settlement with Citigroup and Wachovia Capital Markets LLC and Wachovia Securities LLC is part of a multi-state investigation into broker-dealers’ ARS sales practices stemming from investor losses since the market collapsed last year.
The probe alleged that the firms represented ARS as safe and liquid investments and that when the market collapsed, many investors found their accounts were frozen.
Under the settlement,
The firms are also required to pay the state a total of $2.37 million as administrative compensation for the state’s investigation.
Officials will put 90% of that money into the general fund and 10% into the Michigan Investor Protection Trust, which is funded entirely with securities fines and is devoted to educating consumers on investment issues.
The state is continuing to negotiate with other broker-dealers as part of the probe, said Jason Pool, OFIR spokesman.
Last September, Comerica Inc. agreed to buy back $1.46 billion of auction-rate debt to Michigan investors as part of the same multi-state probe.
“This deal is good for Michigan investors and pumps over $2 million into the general fund,” said OFIR commissioner Ken Ross in a statement.
