Auction-rate securities are bonds whose interest rates reset periodically based on bids submitted by investors to the banks. Since February, these auctions have been failing because banks have backed away from the market as they deal with plummeting earnings. This has left the investors unable to sell their bonds. It's also left cities and hospitals, which often issue the bonds, paying higher interest costs.

The Securities and Exchange Commission and several state regulators have requested information from Wachovia concerning the underwriting, sale and auctions of these securities, the Charlotte bank reported. Wachovia says it will cooperate fully with any investigations.

The bank also said it had been named in a class-action lawsuit filed in March in New York. It alleges that Wachovia misrepresented the quality, risk and characteristics of auction-rate securities. The bank said it "intends to vigorously defend the civil litigation."

In the securities filing, Wachovia also trimmed a writedown related to an insurance portfolio by $1 million, giving it a total first-quarter loss of $707 million.

The Charlotte bank said it took a $314 million writedown -- instead of $315 million -- related to the insurance investment but disclosed little about why the writedown occurred. Wachovia first disclosed the loss last week, which added to the $393 million first-quarter loss the bank announced last month.

The value of the insurance, known as bank-owned life insurance portfolio, "may increase or decrease further depending on market conditions related to the underlying investments," the bank said in the filing.