Cuomo seeks auction-rate pacts with 3 banks
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By Joseph A. GiannoneNEW YORK (Reuters) - New York Attorney General Andrew Cuomo's office, which is investigating Wall Street's sales practices in auction-rate securities, told JPMorgan Chase & Co , Morgan Stanley and Wachovia Corp on Monday that it wants to begin settlement talks immediately.According to letters to the three banks, settlements would have to follow the lead set by UBS AG and Citigroup Inc , which last week agreed to pay a combined $250 million in fines and will repurchase about $27 billion of the debt from their clients."It would be unfair to consumers with accounts at other firms, as well as to the firms that settled, if our investigation were to slow down or stop," David Markowitz, Cuomo's top investor protection lawyer, wrote. "Our investigation's focus is shifting to the next group of market participants."Citi and UBS last week were the first settlements struck by New York since it began investigating five months ago whether brokerages had falsely told clients that auction-rate securities -- long-term debt instruments that pay yields reset through weekly or monthly auctions -- were as safe and as liquid as cash.Instead, auction-rates have been impossible to sell since late January, when investment banks stopped propping up auctions that were being abandoned by investors. Cuomo has demanded that banks and brokers help tens of thousands of U.S. investors by repurchasing these debt securities at face value."We are meeting with regulators (Monday) in Jefferson City (Missouri) and look forward to the discussions," Wachovia spokeswoman Christy Phillips-Brown said. Last month, securities industry watchdogs from six states went to Wachovia's brokerage headquarters in Missouri seeking information about the bank's sales practices in auction-rate securities.A Morgan Stanley spokesman said: "We have been and continue to cooperate fully with the regulators, and have been working with clients since February to provide liquidity on a case by case basis."JPMorgan declined to comment.The Securities and Exchange Commission, a party to Citi's settlement last week, had no comment on New York's investigation. SEC spokesman John Nester said: "Getting investors their money back will continue to be a focus of the enforcement division's investigative efforts."Last week, Merrill Lynch & Co Inc announced it would buy back about $12 billion of auction-rate securities from clients starting in January 2009.(Additional reporting by Jon Stempel, Elinor Comlay and Rachelle Younglai; editing by John Wallace and Gerald E. McCormick)
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