Liz Moyer, 08.12.08
..(Merrill customers) may have to sue Merrill to recoup the loss, while customers of other firms are getting their money back without litigation.
“It’s like Merrill said, ‘Let’s jump before they push us, and maybe we’ll hit the awning instead of the street,’ ” he said.
It seems Merrill’s effort to preempt any more draconian regulatory settlements may force it back to the bargaining table with regulators.
A spokesman for Merrill wouldn’t comment.
The firm still faces probes about its conduct in the sale of auction-rate securities by regulators in Massachusetts and New York and the Securities and Exchange Commission. Massachusetts securities regulator William Galvin filed a civil fraud suit against the firm in July, alleging it co-opted its research analysts into praising the products so the retail broker would sell them, even as the auction-rate market was collapsing.
Between January 1 and February 12, after which Merrill stopped participating in the auctions that supported the market, Merrill Lynch (nyse: MER – news – people ) brokers sold $95 million worth of auction-rate securities to 165 new customers in Massachusetts alone. That doesn’t count existing customers who were allowed to roll over their investments, says a spokesman for Galvin’s office.
Merrill’s announced plan to buy out some retail customers doesn’t fly with Massachusetts (or the New York attorney general, for that matter.) “The case is still ongoing,” Galvin’s spokesman said Monday. “They tried to create the impression that this satisfied the securities division, and it does not.”
UBS and Citi set a precedent many other banks will likely have to follow. New York Attorney General Andrew Cuomo announced Monday that he asked JPMorgan Chase (nyse: JPM – news – people ), Morgan Stanley (nyse: MS – news – people ) and Wachovia (nyse: WB – news – people ) to enter settlement talks. Massachusetts is still investigating Bank of America (nyse: BAC – news – people ), and other states are investigating Goldman Sachs (nyse: GS – news – people ) and Stifel, Nicolaus & Co.
