Wells Fargo announced Wednesday that it has entered an agreement with the California Attorney General’s office and the North American Securities Administrators Association to buyback $1.4 billion in auction-rate securities, while paying fines totaling close to $2 million.

There have been several agreements to buy back auction rate-securities over the past six months, following a collapse in the market for these securities last year.  More than $60 billion in auction-rate security re-purchases have been agreed upon from the likes of Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS) since the $300 billion market for the investment collapsed.

Wells Fargo, like other banks, was accused of misleading investors into thinking the securities were safe and liquid.

California Attorney General Jerry Brown filed suit with the bank late last year.  Wells Fargo also received a formal inquiry from the North American Securities Administrators Association over the sales practices for auction-rate securities.

Investors who bought auction-rate securities through one of Wells Fargo’s three broker-dealers prior to February 13, 2008 are eligible to sell their security back. Eligible investors will receive additional information regarding the terms of the buyback offer by mail within ninety days, according to the bank.

“We have been working with ARS issuers since the auction rate market froze, and while there has been progress, redemptions by issuers have not occurred as fast as anyone would have hoped or predicted,” said CEO of Wells Fargo Investments LLC., Charles Daggs in a press release. “We are glad to have resolved this for our customers through an actual repurchase of their ARS.”

Wells Fargo expects the move to cause an estimated financial impact of approximately $150 million after tax in the fourth quarter of 2009. However, the company expects to eventually recover this cost through redemptions of the securities.