US regulators said that investors who bought risky auction-rate securities from Merrill Lynch before the market for those bonds collapsed will be able to recover up to $7 billion (Dh25.71bn) under a new agreement.
The largest US brokerage will buy back the securities from thousands of investors under a settlement with the Securities and Exchange Commission (SEC), New York Attorney General Andrew Cuomo and other state regulators over its role in selling the high-risk bonds to retail investors.
Under the deal, Merrill agreed to hasten its voluntary buyback plan by repurchasing $10bn to $12bn of the securities from investors by January 2. Merrill also agreed to pay a $125 million fine in a separate accord with state regulators.
The $330bn market for auction-rate securities collapsed in mid-February.
The SEC's estimate of a $7bn recovery is based on its projection of the eventual amount of the bonds that will be cashed in by the affected investors, who bought them before February 13.
The $10bn to $12bn is the total amount that Merrill is committing to buy back.
The firm has to offer redemptions to all investors, though not all may cash in the securities.
The SEC said the new agreement will enable retail investors, small businesses and charities who purchased the securities from Merrill "to restore their losses and liquidity." New York-based Merrill neither admitted nor denied wrongdoing in agreeing to the federal settlement, which is subject to approval by SEC commissioners.