(by Fiona Mitchell)

U.S. Securities and Exchange Commission is conducting a probe on whether top banks of the U.S. violated the rules in their auction-rate bond operations, it says.

The banks are: Citigroup Inc., Merrill Lynch & Co., Wachovia Corp. and Switzerland’s UBS AG. SEC requires these banks to disclose "certain of their practices in connection with auction-rate securities."

Now the bans arrange $435 million of auction-rate shares which are offered by Eaton Vance Floating-Rate Income Trust run by Eaton Vance Corp.

The Securities and Exchange Commission’s main concern is that “Wall Street firms may be tipping off favored clients as to what they need to bid to win a portion of a sale,” Reuters said.