Comerica Settles Michigan ARS; Agrees to Buy Back $1.46 Billion

CHICAGO - Comerica Inc. said yesterday it agreed to buy back $1.46 billion in auction-rate debt to settle a probe launched by Michigan regulators last month.

The settlement is part of a multi-state investigation into broker-dealers' ARS sales practices stemming from investors' losses since the market collapsed earlier this year.

Under the deal, Comerica will offer to buy back all auction-rate securities bought by customers across the nation from its securities subsidiary, Comerica Securities. The firm has sold about $1.46 billion in outstanding ARS, of which roughly $1 billion is held by Michigan customers, according to Michigan Attorney General Mike Cox.

"This settlement will allow citizens to access their money, while helping stabilize an already nervous financial market," said Cox in a statement yesterday.

Comerica also agreed to pay Michigan a civil penalty of $10,000 and $100,000 to the Michigan Investor Protection Trust Fund. The firm will also pay $750,000 to the Financial Industry Regulatory Authority without admitting any wrongdoing.

"We know our clients holding ARS have been facing unprecedented market conditions," said Comerica chairman and chief executive officer Ralph Babb Jr. in a statement.

Since July, eight firms have reached settlements with state regulators as part of the multistate investigation into ARS sales practices. The firms are: Merrill Lynch & Co., Goldman, Sachs & Co., Deutsche Bank, UBS AG, Citigroup Global Markets Inc., JPMorgan Chase & Co., Morgan Stanley, and Wachovia Capital Markets.

Several firms have also settled with the Securities and Exchange Commission. None of the firms admit or deny wrongdoing in any of the settlements. Other states continue to investigate as-yet unnamed firms, including Georgia, Washington, and New Hampshire.

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