NEW YORK (Reuters) - The New York attorney general’s office is issuing subpoenas to several Bank of America Corp executives as the state broadens its probe into the bank’s marketing of auction-rate securities, a person familiar with the investigation said on Wednesday.

A Bank of America advertisement is seen outside one of its branches in New York July 21, 2008. REUTERS/Shannon Stapleton

Despite recent market chatter that Attorney General Andrew Cuomo and the bank were nearing a settlement, New York officials intend to continue their probe after initial efforts raised new questions. According to the source, Cuomo’s office wanted to speak with “several” bank officials to learn more about Bank of America’s handling of auction rates.

Subpoenas will be sent out late on Wednesday or Thursday, the source said.

By targeting individuals, Cuomo’s office is turning the heat up on BofA, one of several banks under investigation as Cuomo and other states pursue a sweeping probe of how Wall Street marketed auction-rate debt to small and institutional investors.

Auction rates are debt instruments issued by funds or municipalities which for years were widely marketed as liquid, cash-equivalents. Yet it has been nearly impossible to cash out of them since auctions for the instruments broke down in January, at which point $330 billion were outstanding. Tens of thousands of investors have been unable to sell the securities at weekly or monthly auctions.

In recent weeks, several leading auction-rate underwriters and distributors settled with Cuomo, agreeing to quickly repurchase about $50 billion of the debt from their customers. BofA, with sizeable investment banking and brokerage arms, is one of several banks still under scrutiny by New York, the SEC and other states.

A spokesman for Cuomo could not be reached immediately for comment.

Charlotte, North Carolina-based Bank of America declined to comment on whether it received subpoenas.

In a written statement, the bank said it “continues to cooperate with regulators and our focus remains on serving our clients. We fully recognize the impact this is having on some of our clients and we are committed to working with those clients during this difficult period.”

In related news on Wednesday, Massachusetts Secretary of State William Galvin threatened legal action against BofA, noting his office has been unable to complete a settlement after negotiating with the nationwide commercial bank.

Last month UBS AG, Citigroup Inc, Morgan Stanley, JPMorgan Chase & Co, Wachovia Corp, Merrill Lynch & Co Inc, Goldman Sachs Group Inc and Deutsche Bank AG all settled allegations that they fraudulently sold the long-dated securities as cash-like even as underwriters saw market demand was waning.