In a move similar to Citigroup's settlement with the state of New York yesterday, UBS AG, Switzerland's biggest bank, has agreed to buy back $19.4 billion of failed auction-rate securities and pay a $150 million fine in the largest settlement in a US probe into whether banks stuck clients with hard-to-sell bonds. (See: Citigroup to settle with authorities on securities fraud)

UBS will repurchase the securities under a settlement with Massachusetts Secretary of State William Galvin and a group of state regulators including New York State Attorney General Andrew Cuomo, as well as the Securities and Exchange Commission, said Brian McNiff, a spokesman for Galvin.

As part of the deal, UBS customers with less than $1 million in auction-rate securities will get their money back by 31 October, while others will get their refund by 1 January, McNiff said. UBS also agreed to pay $150 million in fines, to be divided between Massachusetts and New York, he said.

A UBS spokesman, Kris Kagel, did not comment on the reported deal, but said, ''We are consistently working with regulators toward a comprehensive solution for all (auction-rate securities) investors.''

States including Massachusetts and New York had already filed civil complaints against UBS, claiming it pressured financial advisers to sell the securities before the $330 billion market collapsed in February. (See: New York attorney general charges UBS with securities fraud)

Investors were left unable to sell securities that UBS and other brokerages said were equivalent to cash when dealers that ran the periodic bidding to determine interest costs suddenly stopped supporting the market as they had for years.

The deal is the latest, and by far the largest, in a string of settlements involving state officials. In May, UBS agreed in a settlement with Massachusetts Attorney General Martha Coakley to buy back $37 million in auction-rate securities sold to Massachusetts's cities and towns and the Massachusetts Turnpike Authority.

Then in August, UBS agreed to pay state authorities $1 million to settle claims that it sold auction-rate securities to local agencies in violation of Massachusetts law.

Separately, UBS has said it's cooperating with a tax- evasion probe by American prosecutors. The bank hid as much as $17.9 billion for 19,000 Americans who didn't declare assets to the Internal Revenue Service, according to a Senate subcommittee report.

Last month, UBS said it would stop offering offshore- banking services to American clients through branches not licensed in the US. See: UBS exits offshore business in US