WASHINGTON -- New York Attorney General Andrew Cuomo is warning that he has uncovered “some disturbing facts” that show the “downstream” brokerage firms that merely distributed, and did not underwrite, auction-rate securities, were not innocent bystanders and should be held accountable for investors’ losses.

A deputy to Cuomo issued the warning in a two-page response Wednesday to the Regional Bond Dealers Association, which had urged state and federal regulators to focus their ARS probes and sanctions on the larger firms that underwrote and marketed the ARS.

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