Citigroup Working to Avert Charges

New York Attorney Andrew Cuomo threatened to sue Citigroup for alleged fraud in the marketing and sales of auction-rate securities.

According to The Wall Street Journal, Citigroup is in negotiations with state and federal regulators to resolve allegations of wrongdoing in the auction-rate-securities market. Citigroup could buy back several billion dollars of the illiquid securities from investors while paying a significant fine.

Citigroup has been in talks with Cuomo’s office, other state regulators, and the Securities and Exchange Commission. If an agreement is reached between Citigroup and regulators, the firm would be forced to spend more than $5 billion to buy out individuals, charities, and other investors whose cash is tied up in the frozen auction-rate-securities market, according to WSJ.

Such an agreement could potentially lead to settlements between regulators and other financial institutions in auction-rate-securities probes, such as UBS AG and Merrill Lynch. UBS and Merrill Lynch are currently fight civil fraud charges which were brought by Cuomo’s office and the Massachusetts securities regulator.

The SEC has scheduledd a press conference for this morning in which an announcement regarding auction rate securities is expected.