Wachovia’s WB brokerage arm has received “inquiries and subpoenas” from federal and state regulators over information regarding auction rate securities. The Charlotte, N.C.-based bank has revealed in its quarterly filing with the Securities and Exchange Commission that the agency and several states have requested information concerning the underwriting, sale and subsequent auctions of municipal auction rate securities and auction rate preferred securities. The auction rate security market, through which interest rates on the securities are reset at regular auctions, has been under fire since February. That’s when auctions began failing, leading to a lack of liquidity for the securities.
Swiss bank UBS last month returned $35 million to Massachusetts cities and other municipalities that bought auction-rate securities they could not unload. Massachusetts’ Attorney General earlier this year began investigating whether the bank misled the municipalities about whether the securities were permissible investments for them under state law. Massachusetts also was looking into Merrill LynchMER and Bank of AmericaBAC as part of its probe.
Separately, Wachovia has been named in a civil suit, filed on March 19th in the U.S. District Court for the Southern District of New York. The suit “seeks class action status for customers who purchased and continue to hold auction rate securities based upon alleged misrepresentations made with respect to the quality, risk and characteristics of auction rate securities.”
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