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Merrill reaches tentative deal with SEC over ARS

22/08/2008 - 21:07

WASHINGTON (Reuters) - Merrill Lynch & Co Inc has struck a tentative deal with U.S. securities regulators to buy back up $7 billion in auction-rate securities, the latest in a series of pacts between banks and regulators over the debt instruments.

The U.S. Securities and Exchange Commission said on Friday Merrill agreed to buy back the securities from investors, small businesses and charities who bought them from Merrill.

The deal comes a day after Merrill agreed to pay a $125 million fine, the second-highest after UBS's $150 million among banks to settle so far, and agreed to buy back between $10 billion and $12 billion in ARS from individual investors, according to a settlement with New York State Attorney General Andrew Cuomo.

Prosecutors claim banks misrepresented the securities as close to cash when they knew the market was freezing up.

The tentative deal also requires the investment bank to make its best efforts to provide liquidity for $1.5 billion of the securities held by business and institutional customers.

(Editing by Andre Grenon)

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