Fidelity, Schwab Swept Up in N.Y. A.G.’s Auction-Rate Probe

New York Attorney General Andrew Cuomo is reportedly investigating Fidelity Investments and Charles Schwab over auction-rate securities, although it is unclear at this point over whether the probe is into sales or investment strategies.

Thus far, disciplinary actions concerning the $330 billion market have involved banks and retail brokerages for misrepresenting the risky debt, with the government collecting $360 million in fines related to $30 billion of ARS.

Banks are quickly stepping up to the plate to buy back the debt. Wachovia is taking back $9 billion worth of auction-rate bonds and Merrill Lynch $10 billion. Citigroup isbuying back $7 billion and UBS $19 billion, and Morgan Stanley and JPMorgan Chase are taking back $7 billion. The A.G. is also in talks with Goldman Sachs and has subpoenaed 25 firms.