NEW YORK — Citigroup may be forced to buy back about $8 billion in auction-rate securities and fined as much as $100 million in a settlement with U.S. regulators over claims that it improperly saddled customers with untradable bonds, two people familiar with the case said.
Citigroup, the biggest underwriter of such debt, is in talks with the Securities and Exchange Commission, New York State Attorney General Andrew Cuomo and a group of all the other states, led by Texas, the people said. A preliminary agreement may be reached as early as this week.
The settlement may set a precedent for negotiations with firms including UBS AG, which has already been named in civil complaints by Cuomo and authorities in Massachusetts.
The settlement would be another blow to Citigroup chief executive Vikram Pandit, 51, who recorded a $2.5 billion loss in the second quarter because of $12 billion of write-downs and increased bad-loan reserves. Regulators are trying to restore investor access to the funds, and the states are demanding additional fines, one of the people said.
