Bank of America Corp., the nation's second-largest bank, said it's ready to settle state and federal regulatory probes into the way it marketed auction-rate securities on terms similar to previously announced agreements.
"We understood that we had reached such an agreement in principle nearly two weeks ago," a spokeswoman, Shirley Norton, said in statement yesterday, after negotiating for almost a month with the U.S. Securities and Exchange Commission and regulators in New York and Massachusetts.
Bank of America is among a handful of firms that haven't settled claims stemming from the nationwide probe into firms that allegedly marketed the securities as just about as safe as cash. Attorney General Cuomo subpoenaed eight bank executives, a person familiar with the matter said yesterday.
The bank, based in Charlotte, N.C., is also under pressure from regulators in Massachusetts to strike an accord or face legal action, the secretary of state of Massachusetts, William Galvin, said Wednesday.
"We are still seeking answers to certain questions that have arisen as a result of our initial inquiries," a spokesman for Mr. Cuomo, Alex Detrick, said in an e-mail. "Hopefully, a settlement will be in reach once we have obtained all the relevant information we are seeking, but we do have an obligation to follow all the evidentiary trails."
Mr. Galvin, the 57-year-old state securities regulator who is leading a 12-state task force investigating Bank of America, said progress has been made.
"Getting everyone into a final agreement is a problem," he said in an interview Wednesday. "I'm not sure it's all Bank of America's fault." State and federal regulators have investigated the $330 billion auction-rate market since it fell apart in February. The brokerages that managed the auctions abandoned the market, stranding thousands of investors who could no longer sell the securities at weekly and monthly bidding held to set interest rates.
UBS AG, Citigroup Inc., Morgan Stanley, JPMorgan Chase & Co., Wachovia Corp., Merrill Lynch & Co., Goldman Sachs Group Inc., and Deutsche Bank AG all settled claims in the last month that they fraudulently marketed the long-term securities as cash equivalents.
A spokesman for the SEC, John Nester, declined to comment.
The eight banks that settled agreed to buy back a total of at least $44 billion of the securities from individuals, nonprofits and small businesses and help their institutional clients find markets for the debt. They also agreed to pay fines totaling more than $520 million to state and federal regulators.