While Cuomo waits, Merrill Lynch settles Mass. claims

By John O'Brien | Aug 21, 2008

Merrill Lynch

BOSTON (Legal Newsline) - Another seller of auction rate securities has settled allegations that it misled customers.

Merrill Lynch & Co. agreed to buy back ARS, investments that have their interest rates periodically reset by auctions, from investors affected when the ARS market collapsed in February. Merrill Lynch joins Wachovia, Citigroup, JP Morgan Chase, Morgan Stanley and Swiss bank UBS.

Thursday's settlement by Merrill Lynch was reached with the Commonwealth of Massachusetts through Secretary of State William Galvin. New York Attorney General Andrew Cuomo has threatened legal action if the company does not settle with him.

Merrill Lynch will buy back all illiquid ARS from investors who have less than $3 million on deposit beginning Oct. 15. On Jan. 15, the company will buy back all illiquid ARS from customers with accounts of $100 million or less.

Those companies that settled with Cuomo have been paying extra penalties, like the $50 million Wachovia paid to both the State and the North American Securities Administrators Association.

"At the heart of this investigation is the simple goal of returning billions of dollars back into the hands of investors, which in turn injects confidence into the entire market," Cuomo has said.

Cuomo's agreements have also required the companies to consent to a public arbitration procedure to resolve claims of consequential damages suffered by retail investors as a result of not being able to access their funds.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

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