Citigroup Agrees To Buy Back $7.5B Of Auction-Rate Securities

Washington, D.C. (AHN) - Citigroup Inc. has agreed to buy back or help its clients unload $19.5 billion, including $7.5 billion in auction-rate securities.

The largest U.S. bank by assets has reached a settlement with state and federal regulators, which also include a fine of as much as $100 million to settle charges that it made misrepresentations in its marketing and sales of securities.

The company has scheduled a date, November 5, to buy back auction-rate securities from every investors, charities and small to mid-sized businesses.

Auction-rate securities are preferred shares or bonds with interest rates that reset on a regular period, some times it is reset every week, in auctions managed by the brokerage firms similar to Citigroup that originally sold them.

In the preliminary settlement was announced by Securities and Exchange Commission and New York state officials, the firm said there are about 40,000 customers around the nation who have been unable to sell their securities since February 12.

"Today's settlement sends a resounding message to the entire auction-rate securities industry," New York Attorney General Andrew Cuomo said in the statement.

"This type of deceptive behavior will not be tolerated and we will actively seek justice on behalf of investors."

The market analysts speculate that this is the first settlement related to auction rate securities matter and it may be followed by several similar settlements between the U.S. authorities and other major financial companies.