WASHINGTON - Spurred by hundreds of complaints from investors stuck holding illiquid auction-rate securities, the Securities and Exchange Commission and the Financial Industry Regulatory Authority are probing whether broker-dealers misrepresented the liquidity risks of the securities when they sold them.

The regulators also are looking at a number of other things, including whether broker-dealers favored certain customers by ensuring they would be able to sell their auction-rate securities, when others could not.

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