Mass. regulator subpoenas UBS, Merrill, BofA

[Joanne98]

BOSTON (Reuters) - Massachusetts' top securities regulator said on Friday that his office was demanding information from three large investment houses as he deepens a probe into the $330 billion auction-rate securities market.

William Galvin, the state's secretary of the Commonwealth, issued subpoenas to UBS Securities (VTX:UBSN.VX - News), Merrill Lynch (NYSE:MER - News) and Bank of America Investment Services (NYSE:BAC - News) to determine whether they told investors about the potential risks of these investments, whose market sank in February.

"The recent freezing of the auction markets coincided with the decision by a number of major brokers to stop supporting the auction market and appears to be yet another after-effect of the subprime lending excesses and the subprime market meltdown," Galvin said in a statement.

Auction-rate securities are long-term bonds that behave like short-term debt and have long been popular with conservative investors because of their tax-exempt status.

Galvin, who has won big settlements from brokers and fund managers, began looking into the auction-rate securities market when it became the latest victim of the credit market crunch.

http://biz.yahoo.com/rb/080328/massachusetts_probe.html