Updated from 3:02 p.m. EDT
on late Thursday agreed to settlements with New York Attorney General Andrew Cuomo in the wide-ranging probe into sales of auction-rate securities.
Securities and Exchange Commission
and other state securities regulators have been probing many banks and brokerage firms in a widespread industry investigation into auction-rate securities abuses. Regulators allege that firms misrepresented the securities in their marketing materials as safe, cash-like investments.
Cuomo said that as part of the latest settlements, Merrill will buy back $10 billion to $12 billion of auction-rate securities from retail investors and pay a $125 million fine. Deutsche Bank agreed to buy back roughly $1 billion and pay a $15 million penalty. Goldman Sachs will buy back about $1.5 billion and pay a $22.5 million fine, according to a conference call with the media Thursday afternoon.
Together, through eight settlements, Wall Street firms will buy back some $57 billion in auction-rate securities from retail investors and pay more than $520 million in penalties.
Cuomo's investigation, which already had netted settlements with
, has expanded to include roughly 25 banks and brokers, he said.
Individuals, charities and small businesses with assets under $4 million at Merrill will be able to sell us their ARS as of Oct. 1, according to the settlement. In addition, the firm will move up the date to purchase the securities held by its remaining retail clients -- which it
voluntarily agreed to do
earlier this month -- from Jan. 15 to Jan. 2. All Merrill clients can sell back securities to the firm through Jan. 15, 2010.
"We will accelerate the plans we first announced two weeks ago for purchasing auction rate securities," Thain said in a statement. "We are pleased our clients have the certainty of a favorable resolution to this unprecedented liquidity crisis."
Cuomo had said in a television interview early Thursday that he would likely take the brokerage firm to court for refusing to settle its investigation. But on the call he said he had been in discussions throughout the day with Thain to resolve the matter.
"With Merrill, we were right up against the deadline," Cuomo said on the call. "This was the most expeditious way and
Thain wanted to take leadership and he did. It was a serious matter obviously and he acted responsibly."
Bank of America
, another firm that reports suggested Cuomo was pursuing in the probe, was not part of Thursday's settlement.
The settlement came just hours after Merrill reached a settlement with Massachusetts securities regulators regarding a probe into the sale of auction-rate securities.
Earlier in the day, Massachusetts Secretary of the Commonwealth William Galvin said that Merrill Lynch, Pierce, Fenner & Smith, the brokerage subsidiary of the New York-based parent company, has agreed to buy back all illiquid auction-rate securities at par value from its retail customers who have less than $3 million on deposit beginning Oct. 15. No penalty or fine was listed in the release.
The agreement, like the one with Cuomo in New York, will speed up the timetable for smaller retail investors to get their money back. Massachusetts regulators reiterated Thursday that Merrill would buy back the securities from retail investors with $100 million or less in deposits starting in January.
The agreement alleges Merrill engaged its independent research department to aid "sales efforts geared towards reducing its inventory of ARS" and with in writing "more sales friendly outlooks of the auction market," the release says.
"The settlement will provide thousands of Merrill Lynch clients with access to billions of dollars in funds that have been frozen in the ARS market," according to a press release by the enforcement section of Massachusetts securities division. Regulators had filed a suit against Merrill Lynch on July 31.
Shares of Merrill closed down fractionally to $24.34.
Regulators also are probing several other brokerage firms including
The Wall Street Journal
reported Thursday morning.