Citi Talks With Regulators May Lead to Buybacks: WSJ

Citigroup is in talks with state and federal regulators to resolve allegations of wrongdoing in the auction-rate-securities market that could result in its buying back several billion dollars of the illiquid securities, Wall Street Journal said.

Oliver Quillia for

If Citigroup reaches an agreement with regulators, the firm could be forced to spend more than $5 billion to buy out individuals, charities and other investors whose cash is tied up in the frozen auction-rate-securities market, the Journal said citing people familiar with the negotiations.

It also could include a fine of as much as $100 million, the paper said citing

Citigroup has been in talks this week with representatives from New York Attorney General Andrew Cuomo's office, other state securities regulators and the Securities and Exchange Commission, the paper said.

Cuomo last week threatened to charge Citigroup, accusing it of fraudulently marketing and selling auction-rate securities, and destroying documents that had been subpoenaed.

David Markowitz, chief of the state's investor protection bureau, had accused the largest U.S. bank by assets of wrongly telling customers that auction-rate debt was safe, liquid and the equivalent of cash.

Citigroup could not be reached immediately for a comment on the story.