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California To Get $9.7 Million From Bank Of America In ARS Case

DOW JONES NEWSWIRES

California will get $9.7 million as part of Bank of America Corp.'s (BAC) agreement last fall to pay $50 million in penalties as part of a multi-state probe of the auction-rate-securities market.

The disclosure of California's portion, made Monday, comes as the company has previously agreed to repurchase billion of dollars in ARS, the market for which seized up in February 2008 as auctions began failing amid a dearth of investors.

Bank of America neither admitted or denied the order's findings and conclusions in which the $9.7 million in penalties was contained.

Auction-rate securities are debt instruments whose interest rates are meant to be reset periodically at daily, weekly or monthly auctions. But as the auctions began failing 16 months ago, interest rates rose while investors were locked into long-term investments that had been promoted as safe and liquid.

California's Department of Corporations, in saying its deal will aid the return of more than $3 billion to investors in the state, noted Bank of American made repurchase offers to all individual, small-business and charitable institutional investors from California.

For other institutional investors, the company has to use their "best efforts" to work with ARS issuers, state and federal regulators and other parties to attempt to provide liquidity solutions by year's end. Futher action could be called if no solution results, the agency added.