Citigroup (C) has become the latest Wall Street bank to be subpoenaed in a federal investigation into the collapse of the Auction Rate Securities market last winter. Auction Rate Securities (ARS) are debt instruments, usually corporate or municipal bonds, with long-term maturities and interest rates that are periodically reset in auctions. In February, the $330 billion market for ARS imploded when investors stopped bidding for them, leaving many investors stuck with un-sellable assets.
Several class action lawsuit have been filed charging banks like UBS, Morgan Stanley, Citigroup, and Merrill Lynch, with fraud for marketing the securities as being as liquid and as safe as cash. Citigroup issued the following statement regarding its role in the investigation:
The company, along with other industry participants, has received subpoenas and/or requests for information from various self-regulatory agencies and federal governmental authorities including the SEC.
In addition to federal regulators from the SEC, Citigroup said it was also cooperating with state officials from New York, Texas, and Massachusetts
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