Morgan Stanley will pay two Massachusetts municipalities $1.5 million in connection with auction-rate securities the investment bank sold to New Bedford and Hopkinton, with the firm agreeing to pay additional reimbursements, if needed.

State Attorney General Martha Coakley announced the agreement yesterday, concluding an evaluation her office began in February of Morgan Stanley's marketing strategies to local governments.

"We appreciate Morgan's cooperation and are pleased that it has agreed to perform this thorough review of all its city and town clients in the commonwealth in order to determine whether additional reimbursements are appropriate," Coakley said in a press release. "Cities and towns need every available dollar in their budget, particularly during these stressful economic times."

The city of New Bedford and the town of Hopkinton will receive a total of $1.5 million. In addition, Morgan Stanley will identify all of its municipal investment clients in the commonwealth that have invested in auction-rate securities. "Morgan Stanley will then repay the towns and cities all of their investment monies," according to the press release.

A spokeswoman for Morgan Stanley said the settlement does not include payments beyond reimbursement of auction-rate investments.

"We are pleased to settle this matter without penalty," she said.

This is the third auction-rate reimbursement payment through Coakley's office. In February, Merrill Lynch & Co. agreed to pay Springfield $13.7 million for allegedly misleading the city into buying auction-rate bonds. In May, Coakley's office negotiated a $37 million reimbursement from UBS Securities LLC, with those funds going to replenish various city and town investment portfolios.

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