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Cuomo Faults Schwab's Auction-Rate Securities Marketing

New York's attorney general, Andrew Cuomo, has informed Charles Schwab & Co. that it plans to sue the company for civil fraud over its marketing and sales of auction-rate securities, Liz Rappaport reports. In a letter to the brokerage sent Friday, Cuomo says that his office would be open to a settlement, but Schwab must agree to buy back the securities from investors still stuck with them.

Auction-rate securities are short-term debt instruments whose prices reset in periodic auctions. Cuomo charges that Schwab's brokers had little idea of what they were selling and later failed to tell clients that the market was collapsing.

Schwab says in a statement that Cuomo's allegations "unfairly lay blame on our company" and that "Schwab brokers, while trained to levels beyond industry standards, could not be expected to foresee and disclose market risks that even regulators and market experts did not foresee."

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