BofA agrees to buy back $4.5 billion in auction-rate securities

Chris Rizo Sep. 10, 2008, 10:34am

BOSTON (Legal Newsline)-Bank of America Corp. on Wednesday agreed to buy back $4.5 billion of auction-rate securities, under a nationwide settlement with Massachusetts Secretary of the Commonwealth William Francis Galvin.

The Charlotte, N.C.-based bank was being investigated for his sales and marketing of auction-rate securities.

The bank said it will redeem all illiquid ARS, at par value, from customers between Oct. 1 and Dec. 31.

The $330 billion market auction-rate securities market collapsed in February amid the specter of corporate borrowers not being to cover debt service on the securities.

"With this settlement, thousands of Bank of America clients will be provided with access to billions of dollars in funds that have been frozen in the auction-rate securities market," Galvin said in a statement.

A handful of banks, including BofA, have been accused of illegally misrepresenting to clients the risks of investing in auction-rate securities for which the interest rate or dividend is reset periodically through an auction mechanism.

In all, eight Wall Street banks -- including Citigroup Inc., Goldman Sachs Inc. and UBS AG -- have settled with regulators over auction-rate securities. The banks have agreed to ARS buybacks totaling about $50 billion.

Bank of America, which has not admitted to any wrongdoing, also said it is continuing to cooperate with New York State Attorney General Andrew Cuomo and the U.S. Securities and Exchange Commission.

Cuomo and the SEC are separately investigating Bank of America, the second-largest U.S. bank by assets.

"The SEC Division of Enforcement expects to soon announce the terms of a preliminary settlement with Bank of America that results from our ongoing auction-rate securities investigations," Linda Thomsen, director of the SEC's enforcement division, said in a statement.

From Legal Newsline: Reach reporter Chris Rizo at

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