In the latest development in New York Attorney General Andrew Cuomo’s investigation into the auction-rate securities market, his office will soon take legal action against Merrill Lynch (MER).

The lawsuit is the latest development of an industrywide investigation of  banks that mishandled risky debt. Cuomo’s plan to take legal action was announced shortly after the details of an agreement the office had made with Wachovia (WB) were released.

Wachovia has agreed to buy back more than $8.5 billion in auction-rate securities by November 28. The company will also pay $50 million in civil penalties

Four other banks have already reached settlements with the Attorney General and the Security and Exchange Commission, including UBS AG, Citigroup, Morgan Stanley, and JPMorgan Chase.