Credit Crisis Backlash as States Probe Auction-Rate Securities

New York Attorney General Andrew Cuomo's office subpoenaed 18 banks and securities companies as part of an investigation into how auction-rate securities are being marketed to investors, according to a report.

The firms include UBS AG, Citigroup Inc, Merrill Lynch & Co. and JPMorgan Chase & Co. and Goldman Sachs Group Inc., a person familiar with the situation told the Wall Street Journal on Thursday.

Separately, a national securities group said Thursday that a task force of comprised of members of eight state regulators across the U.S. have been investigating auction-rate securities and are working to help investors who cannot access funds that brokers placed in the complex investment products.

The regulators are part of the North American Securities Administrators Association, which doesn't have any investigative or enforcement authority. The probes are being conducted by individual jurisdictions.

"If violations are uncovered, then state securities regulators will seek appropriate remedies, including a much stronger commitment from Wall Street to provide their retail clients with an acceptable solution," said Karen Tyler, NASAA President and North Dakota Securities Commissioner.

Regulators involved come from Florida, Georgia, Illinois, Massachusetts, Missouri, New Hampshire, New Jersey, Texas and Washington. The ARS Task Force is chaired by Bryan Lanagne, Director of the state regulator the Massachusetts Securities Division.