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Agency wants to settle auction-rate bond probe

Thursday, Jan. 13, 2005 | 9:51 a.m.

The U.S. Securities and Exchange Commission has begun talks with several brokerage firms about a combined settlement of its probe of the $204 billion auction-rate bond market, people familiar with the matter said.

The SEC's investigation of 25 brokerages has uncovered evidence of potential violations, said the people, who asked not to be named. Sales of the bonds, whose yields are reset periodically by auctions, can be manipulated when brokers share information on bids. That can drive up borrowing costs for the states, cities and companies that issue the securities.

By seeking a single settlement, the SEC may avoid spending time and money litigating multiple cases, said Donald Langevoort, a securities law professor at Georgetown University.

The probe of firms including UBS AG, Citigroup Inc., Merrill Lynch & Co., Wachovia Corp. and A.G. Edwards Inc. may result in changes in how the firms operate, said Langevoort.

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