State's talks with Bank of America stall

Talks with Bank of America Corp. over sales of auction-rate securities have stalled, Secretary of State William F. Galvin said today. If the banking giant doesn’t agree to repay its customers soon, the Massachusetts Securities Division may sue, he said.

Galvin said Massachusetts regulators have been negotiating with Bank of America for two weeks. Galvin said the delays are leaving investors trapped with no answers. ‘‘We want to resolve this for them,’’ he said.

The Globe previously reported that Bank of America was warning some large clients about the looming problems in the auction-rate market in December, while continuing to sell the securities without such warnings to smaller investors through February.

Auction rate securities are the bonds of nonprofits and municipalities that were widely sold on Wall Street as safe and cash-like. But all trading in the securities ceased in February, amid other problems in the credit markets, leaving thousands of investors unable to access their money.

State and federal regulators have so far secured more than $50 billion in settlements with brokerage firms that sold auction-rate securities and then stopped trading them.

Bank of America had no immediate comment.
(By Beth Healy, Globe Staff)