Details of Citi's ARS settlement

Under a settlement with the state regulatory agencies and the Securities and Exchange Commission unveiled last week, the New York-based megabank also offered to buy back $7.3 billion in ARS from individual investors, small institutions and charities who bought them before February 11 this year.

The bank said in a statement it may still face legal action regarding ARS sold to larger "institutional" investors. Citi had been charged by regulators with marketing the securities as safe investments in contrast to money-market investments.

Citi will pay $50 million in fines to New York state and $50 million in fines to other state regulators.

"We are pleased to reach this agreement in principle with the New York Attorney General, the Securities and Exchange Commission, and other state regulatory agencies," the bank said in a statement. "We remain committed to continuing our work on initiatives that will secure the best and fastest route to providing liquidity to our clients."

Citi offered to buy back ARS at "par value" that are not auctioning.

The impact for the bank's balance sheet will be "de minimis," Citi said in a statement. The difference in buyback price and their current market value is about $500 million before taxes, the bank said.

If investors need cash in the meantime, the bank will offer loans for the price of the ARS on a "non-recourse" basis. The loans will be due as soon as the bank buys the ARS or when the investor declines the purchase offer.

The bank says the New York Attorney General will monitor the bank's progress as it makes its "best efforts" to help out investors. The attorney general "retains the right to take legal action" against the bank starting on November 4 with respect to the bank's institutional investor clients. The other regulators have a similar agreement but the date extends until December 31.

The bank will refund refinancing fees to municipal ARS issuers that issued ARS in the primary market between August 2007 and February 11, 2008 and refinanced those securities after February 11.