Massachusetts, Merrill settle auction-rate dispute

NEW YORK—Massachusetts Secretary of State William Galvin says Merrill Lynch & Co. had agreed to settle a case involving its sale of auction-rate securities and the brokerage would soon begin buying back the illiquid securities.

Galvin said Thursday the deal calls for the New York-based investment bank to buy back on Oct. 15 all illiquid auction rate securities from investors who have less than $3 million on deposit. He said Merrill agreed to buy back auction-rate securities from larger investors in January.

Massachusetts had said Merrill Lynch misled investors about how safe the securities were.

The investment firm had no comment on the deal.

Merrill Lynch still faces a separate enforcement action from the New York attorney general.