BofA to buy back $4.5 billion in ARS

Two divisions of Bank of America Corp. have agreed to buy back $4.5 billion in auction rate securities from individuals and small businesses across the country, according to an agreement announced today by Massachusetts Secretary of the Commonwealth William F. Galvin. An investigation found that the Charlotte, N.C.-based bank was aware of the risk of collapse in the ARS market yet continued to sell the securities as "safe, liquid, money-market-like instruments, notwithstanding the risk." Under the terms of the settlement, Bank of America Investment Services Inc., also of Charlotte, and Bank of America Securities LLC of New York will buy back illiquid ARS at par-value from all retail customers between Oct. 1 and Dec. 31. The offer was extended to include all small-business customers who have up to $10 million on deposit and charitable-entity customers who have up to $25 million on deposit. The bank expects to record a pretax charge of about $275 million in connection with the buybacks. Bank of America “continues to cooperate fully with the SEC's and the New York attorney general's ongoing investigations,” the company said in a statement. The market for ARS, estimated at $330 billion, seized up last winter, leaving investors unable to cash out of their positions.