US banks Morgan Stanley and JP Morgan Chase have agreed to refund US$7 billion to its clientele in a buy-back scheme fleshed out with the New York Attorney General and other investigating regulators.
The banks had been accused of marketing auction-rate securities as a safe buy option, which was untrue. Other firms are also being investigated. Morgan Stanley has agreed to buy back US$4.5 billion worth of such securities by December.
JP Morgan Chase agreed to redeem approximately US$3 billion worth of auction-rate securities. Both banks will also pay fines to the state of New York worth millions of dollars.