WASHINGTON, Aug 7: The Securities and Exchange Commission said on Thursday it had reached a multibillion-dollar settlement with US banking giant Citigroup regarding its marketing of complex debt securities.

The regulator said that under the settlement’s terms, Citigroup has agreed to effectively buy back $7.4 billion worth of auction-rate securities it marketed to tens of thousands of customers.

The deal also requires Citigroup to “liquidate” by the end of 2009 some $12 billion worth of auction-rate securities it sold to other investors.

“Today’s agreement in principle provides real relief to investors,” said Linda Chatman Thomsen, the head of the SEC’s enforcement division.

“This settlement in principle is an outstanding example of federal and state regulatory cooperation for the benefit of investors and markets,” Thomsen said at a news conference at SEC headquarters in Washington.

The settlement was announced by federal and state regulators as a widespread credit crunch continues to weigh on major Wall Street banks.

Officials said the buyback will benefit around 38,000 investors, small businesses and charities who had purchased the securities through Citigroup.

Auction-rate securities, essentially debt instruments issued by financial firms, municipalities and student-loan companies, typically have a fairly lengthy maturity, but the interest rates on such securities can be volatile and change at weekly and monthly auctions overseen by banks.—AFP