Auction-rate securities under heightened scrutiny

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NEW YORK: State regulators are stepping up their inquiries into auction-rate securities and how Wall Street banks sold them to investors.

The attorney general of New York, Andrew Cuomo, has subpoenaed 18 banks that underwrote and brokered the investments, people with knowledge of the inquiry said Thursday. Also, securities regulators from nine other states have formed a task force to look into the matter.

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In February, many investors found they could no longer get out of the securities because hundreds of auctions failed when several big banks trying to conserve their capital stopped bidding in the auctions they were administering.

The regulators are looking at how banks disclosed the risks of auction failures to investors, mostly individuals and corporations.

IHT