Two more of Wall Street’s top investment banks have agreed to settlements with regulators over their sale of auction rate securities.

The Goldman Sachs Group, Inc. announced that it has entered into a settlement in principle with the Office of the Attorney General of the State of New York and the Illinois Securities Department (on behalf of the North American Securities Administrators Association) regarding auction rate securities. Under the settlement, among other things, Goldman Sachs will offer to immediately repurchase at par the outstanding auction rate securities that are held by its retail clients and were purchased through the firm prior to February 11.

Goldman will also pay a US$22.5 million penalty. The firm neither admits nor denies allegations of wrongdoing. Effective immediately, it will offer to repurchase at par approximately US$1 billion of ARS still held by private clients, and it will compensate private clients who purchased ARS through the firm and sold them at a loss.

Additionally, Merrill Lynch & Co. announced that it has reached a deal with the NY attorney general and state securities regulators. Under this agreement, Merrill Lynch said it will accelerate the plans it first announced on August 7, to purchase auction rate securities from its retail clients. It is estimated that Merrill Lynch retail clients eligible for the purchase currently hold an estimated US$4 billion in ARS, which Merrill Lynch expects to be reduced to under US$3.25 billion by October as a result of announced and anticipated issuer redemptions.

Merrill will also compensate clients who sold their ARS at a loss; it will participate in a special arbitration process; and it will pay a US$125 million penalty. The firm also neither admits nor denies allegations of wrongdoing.

There are also reports that Royal Bank of Canada is in settlement talks with U.S. regulators over its role in the troubled U.S. auction-rate securities market.