US SEC, states close to auction-rate pacts: sources

NEW YORK (Reuters) - U.S. and state regulators are close to reaching a settlement with multiple banks accused of selling auction-rate securities under false pretenses that would force them to repurchase billions of dollars of the now-illiquid securities at face value, people familiar with the matter said on Wednesday.

A five-month investigation led by New York Attorney General Andrew Cuomo and the Securities and Exchange Commission into the auction-rate market led to agreements last week with Citigroup and UBS. These banks will repurchase securities and together pay $250 million in fines.

On Monday, New York put pressure on JPMorgan Chase & Co, Morgan Stanley and Wachovia Corp to enter settlement talks that would yield similar terms.

Morgan Stanley later on Monday announced a plan to repurchase these securities at par, though the offer was quickly dismissed by Cuomo\'s office as too little, too late.

Officials from the SEC and Cuomo\'s office could not be reached for comment. JPMorgan, Morgan Stanley and Wachovia declined comment.

(Reporting by Joseph A. Giannone)