Wachovia Corp. will buy back more than $8.5 billion of auction-rate securities as part of an agreement to end investigations by state regulators into the marketing of the complex securities.

New York Attorney General Andrew Cuomo said Friday that the Charlotte company's Wachovia Securities LLC and Wachovia Capital Markets LLC will pay $50 million in civil penalties, which will be divided between New York and members of the North American Securities Administrators Association.

"At the heart of this investigation is the simple goal of returning billions of dollars back into the hands of investors, which in turn injects confidence into the entire market," Cuomo said in a press release. "The industry is now taking responsibility for correcting a problem they helped create, and we'll continue working to make all investors whole."

Missouri Secretary of State Robin Carnahan, the state's top securities regulator, was expected to discuss the agreement at a press conference Friday, according to CNBC. Missouri began an investigation of Wachovia Securities in April.

Wachovia will buy back all illiquid auction-rate securities from retail clients, charities, and small businesses by Nov. 28, Cuomo said. The company will pay damages to investors who sold their holdings for a loss and has agreed to an arbitration procedure to resolve claims of "consequential damages" suffered by retail investors as a result of not having access to their funds, he said.

It also agreed to reimburse all refinancing fees to any New York municipal issuers that issued auction-rate securities through either unit since August of last year.
In recent weeks Citigroup, UBS, JPMorgan Chase, Morgan Stanley, and Merrill Lynch. have announced plans to buy back billions of dollars of the securities.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.