Citigroup is in negotiations with US state and federal regulators to resolve allegations of wrongdoing in the auction-rate securities market that could result in its buying back several billion dollars of the illiquid securities from investors and paying a sizeable fine, reports the WSJ. New York attorney general Andrew Cuomo last week threatened to sue Citi for alleged fraud in the marketing and sales of ARS. Cuomo’s office has said the firm wrongly told customers the securities were safe, liquid and cash-equivalent. It added that the firm failed to tell investors that, from Aug 2007 until earlier this year, the market was kept afloat primarily because the bank placed bids in auctions for the securities. Citi has been in talks this week with representatives from Cuomo’s office, other state securities regulators and the SEC.
