Merrill reaches tentative deal with SEC over ARS

WASHINGTON (Reuters) –

Merrill Lynch & Co Inc (MER.N) has

struck a tentative deal with U.S. securities regulators to buy

back up $7 billion in auction-rate securities, the latest in a

series of pacts between banks and regulators over the debt

instruments.

The U.S. Securities and Exchange Commission said on Friday

Merrill agreed to buy back the securities from investors, small

businesses and charities who bought them from Merrill.

The deal comes a day after Merrill agreed to pay a $125

million fine, the second-highest after UBS’s $150 million among

banks to settle so far, and agreed to buy back between $10

billion and $12 billion in ARS from individual investors,

according to a settlement with New York State Attorney General

Andrew Cuomo.

Prosecutors claim banks misrepresented the securities as

close to cash when they knew the market was freezing up.

The tentative deal also requires the investment bank to

make its best efforts to provide liquidity for $1.5 billion of

the securities held by business and institutional customers.

(Editing by Andre Grenon)