Wachovia Corp. announced today that it is also reached an agreement in principle for a settlement with authorities concerning its sales of auction rate securities (ARS).

The firm has settled with the Missouri Secretary of State (as the lead state in the North American Securities Administrators Association task force investigating the marketing and sale of auction rate securities), the attorney general of New York, and the Securities and Exchange Commission regarding ARS.

As with the other firms that have reached similar deals, Wachovia will offer to purchase at par ARS held by small investors; it will reimburse investors who would have been covered by the offer but who sold their ARS below par; it will offer loans to affected clients in need of liquidity; and it will pay a total fine of US$50 million to the state regulatory agencies. The firm neither admits nor denies allegations of wrongdoing.

Wachovia currently estimates that the par value of ARS currently outstanding and eligible for purchase under the offer totals approximately US$8.5 billion.

“We understand that unprecedented market conditions have created difficulties for our clients, particularly those holding auction rate securities,” said Robert Steel, president and chief executive officer of Wachovia Corp. “We are pleased to announce a comprehensive solution for the liquidity needs of clients who purchased auction rate securities at Wachovia and to resolve this matter with federal and state regulators.”

Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, said, “We continue to work with state regulators and others to bring real relief to investors who were not given the forthright information they needed in the process of purchasing auction rate securities. This agreement in principle with Wachovia, if approved by the commission, will permit tens of thousands of Wachovia investors to get their money back.”

Additionally, NY attorney general, Andrew Cuomo, noted, “The industry is now taking responsibility for correcting a problem they helped create, and we’ll continue working to make all investors whole.”

Today’s agreement comes a day after agreements with J.P. Morgan and Morgan Stanley and one week after the settling of similar allegations against Citigroup and UBS. The five settlements together provide relief to thousands of investors who were left holding nearly US$35 billion worth of securities they could not sell after the widespread failure of the auction rate securities market this past February.