NEW YORK (Reuters) - UBS AG <UBSN.VX> has received subpoenas from New York attorney general Andrew Cuomo on how it handled auction rate debt, a $330 billion market that seized up in late January, a source who had seen the document said on Thursday.
By Joan Gralla
NEW YORK (Reuters) - UBS AG <UBSN.VX> has received subpoenas from New York attorney general Andrew Cuomo on how it handled auction rate debt, a $330 billion market that seized up in late January, a source who had seen the document said on Thursday.
The "wide-ranging" probe into this kind of debt -- which has a long-term maturity but whose interest rates are reset at periodic auctions -- delves into issues like how auctions were handled and how the debt was sold, said the source, who requested anonymity.
UBS declined comment on the probe.
!ADVERTISEMENT!Bond Buyer, a daily trade publication, said on Thursday that other banks that received subpoenas included Merrill Lynch <MER.N> and JPMorgan Chase <JPM.N>.
Goldman Sachs <GS.N>, in its corporate filings, has already said "various governmental agencies and self-regulatory organizations" were asking questions about auction rate products and failed auctions.
On Thursday, a Goldman spokesman said the filings had all the information the bank wished to reveal.
A Merrill spokesman said the company, as a matter of policy, did not comment on regulatory matters but cooperated with investigators when asked to do so.
A few months ago, investors flooded dealers with too much auction rate debt because they feared the insurers that guaranteed it were no longer credit-worthy. This caused the auctions to fail because there were too few buyers, trapping investors who needed their cash but could not sell their debt.
Lawsuits have been filed by investors who believe they were not warned about this risk.
The regulators probing this market include the top securities regulator in Massachusetts. The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority also are probing how banks handled this auction rate debt, according to the Wall Street Journal.
Spokesmen for the Democratic attorney general and JPMorgan and other banks that also were active in auction rate securities, including Citigroup <C.N> and Bank of America <BAC.N>, were not immediately available. Bank of New York Mellon had no immediate comment. A Morgan Stanley <MS.N> spokeswoman declined comment.
(Reporting by Joan Gralla; Editing by Chizu Nomiyama)
