Andrew Cuomo, the New York Attorney-General, is preparing to file civil securities fraud charges against embattled investment bank UBS, according to reports.

Mr Cuomo may file the charges, which relate to the Swiss bank's participation in the auction rate securities market, in the next few days, according to The Wall Street Journal.

Auction rate securities are short-term financial instruments that investors hold as an alternative to cash. Mr Cuomo’s charges will relate to whether UBS gave investors sufficient warning that the securities, which are generally easy to sell, can become illiquid.

The $330 billion market, in which charities, student loan companies and other institutions issue the securities via investment banks, collapsed in February leaving thousands of investors unable to sell their holdings.

The Massachusetts securities regulator has already filed charges against UBS relating to the auction rate securities market.

The Journal said that the New York case may also include charges against individual bankers, which was not a feature of the Massachusetts case.

UBS said it would be "disappointing" if Mr Cuomo filed a complaint because the bank was working with regulators and peers to find a solution to the auction rate issue.

UBS, which has been the European banking sector’s worst credit crisis casualty with €30 billion of losses so far, is also under fire from US tax authorities, which claim the bank’s advisers helped wealthy American clients evade taxes.

Last week the banks caved into mounting pressure from the US Government and announced plans to close the Swiss bank accounts of all its American customers.

The US Government and the Internal Revenue Service (IRS) have been turning the screw on banks suspected of helping clients to evade tax through undeclared offshore accounts. They have been pressing UBS to give details of 19,000 US clients with $17.9 billion (£8.9 billion) in undeclared Swiss bank accounts.

An investigation found that only 1,000 of UBS's 20,000 American clients with Swiss bank accounts had declared their accounts to the IRS.

UBS will not hand over identities of all 19,000 of these customers because, sources say, it does not follow that every undeclared account has broken US tax law. Instead it will identify only those it believes may have engaged in tax fraud, although that number is expected to run into thousands.

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