WASHINGTON — State securities regulators reached settlements in principle with Wells Fargo & Co. under which the firm will pay $1.9 million in penalties and buy back about $1.4 billion of illiquid auction-rate securities primarily held by its subsidiaries' retail customers since early 2008 when the ARS market collapsed.

The settlements end litigation filed in April by California Attorney General Jerry Brown and a probe led by the securities division of the Washington State Department of Financial Institutions on behalf of the North American Securities Administrators Association into allegations that San Francisco-based Wells Fargo misled clients by falsely assuring them that ARS were a safe, liquid alternative to cash, certificates of deposit or money market funds.

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