J.P. Morgan Chase & Co. and Morgan Stanley Inc. are joining the list of Wall Street brokerage firms buying back clients’ auction rate securities.

Earlier this week, Morgan Stanley announced its plans to buy back its clients auction rate securities. Today, J.P. Morgan said that it will also offer to buy back, at par, ARS that were purchased through the firm prior to February 12.

The move comes as part of an agreement in principle to settle investigations by the New York state attorney general’s office and the Office of Financial Regulation of the State of Florida (on behalf of the North American Securities Administrators Association. The agreements settle allegations that J.P. Morgan and Morgan Stanley made misrepresentations in their marketing and sales of auction rate securities. The firms neither admit nor deny allegations of wrongdoing.

According to the deals, J.P. Morgan and Morgan Stanley have agreed to buy back, no later than November 12, and December 11, respectively, all illiquid auction rate securities from all J.P. Morgan and Morgan Stanley retail customers, charities, and small to mid-sized businesses. Firms will also pay damages to investors who sold securities for a loss. The firms will also pay New York State and NASAA civil penalties in the amount of US$25 million and US$35 million, respectively, which will be distributed pro rata by states’ investment dollar totals.

Today’s agreements with J.P. Morgan and Morgan Stanley come less than a week after similar allegations were settled against Citigroup and UBS. The four settlements together provide relief to thousands of investors who were left holding US$27 billion worth of securities they could not sell after the widespread failure of the auction rate securities market this past February.

J.P. Morgan’s offer will cover an estimated US$3 billion in ARS, includig those purchased through the recently-acquired Bear, Stearns & Co. Inc. Based on current market conditions and on assumptions about the rate at which individual customers will tender securities, the firm’s preliminary estimate of the difference between the aggregate purchase price and market value of the securities it purchases under the program will be in the range of approximately US$400 million on a pre-tax basis.

“Returning billions of dollars back to investors not only protects their interests but also increases confidence in the entire market,” said NY attorney general Andrew Cuomo. “Today’s multi-billion dollar agreements are the latest victories for investors seeking relief from the collapse of the auction rate securities market, which has left a stranglehold on billions of dollars. The industry is taking responsibility for correcting a problem they helped create, and that’s a good thing. The fundamental goal has been to return money into the hands of investors, and that’s what these deals do.”

SEC Enforcement Division director Linda Thomsen said, “For several months, the SEC has worked very closely with the states as we have investigated these cases. We will continue to coordinate our efforts with the states. Our investigations are ongoing, and include both potential corporate and individual violations of the federal securities laws. In the event that any such violations are established, the terms of today’s settlements would be taken into account in any Enforcement Division recommendation to the commission.