WASHINGTON - Fidelity Investments and Charles Schwab & Co. are suggesting state and federal securities regulators focus their auction-rate securities investigations on the major banks and broker-dealers that underwrote ARS rather than smaller brokerages that had no advance knowledge that the ARS market was going to collapse.

Reacting to requests from state regulators that they buy back at par the now-illiquid ARS their brokerage units sold to retail customers as safe securities, representatives of both Fidelity and Charles Schwab stressed yesterday that their companies did not underwrite the ARS products and said they did not mislead customers about ARS.

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