SEC investigating bank over auction-rate securities sales

[JURIST] The Bank of New York Mellon Corp. [corporate website] disclosed Friday in its quarterly report [text; materials] that the Securities and Exchange Commission (SEC) [official website] is investigating possible breaches of procedure by one of the bank's subsidiaries in auction-rate securities sales and purchases. Auction-rate securities [New York Times report] are long-term bonds with varying interest rates that change based on weekly or monthly auctions. In the report, bank officials wrote:

The Company self-disclosed to the SEC that Mellon Financial Markets LLC ("MFM") placed orders on behalf of issuers to purchase their own Auction Rate Securities. The SEC is conducting an investigation of those transactions. MFM is cooperating fully with the SEC in its investigation.
AP has more. Reuters has additional coverage.

On Thursday, the SEC agreed to a preliminary settlement with financial firm Citigroup Global Markets, Inc. [corporate website; SEC press release] over the firm's auction-rate securities practices, and Friday the agency entered into a similar settlement with the firm UBS [corporate website; SEC press release]. UBS is also facing a lawsuit [complaint, PDF; JURIST report] filed late last month by New York Attorney General Andrew Cuomo [official profile] for allegedly misrepresenting auction-rate securities as low-risk despite the actual volatility of such investments. AP has more.

 

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