NEWARK, N.J. (Legal Newsline) - New Jersey Attorney General Paula Dow has announced a settlement requiring Merrill Lynch to complete or confirms its repurchase of auction-rate securities from New Jersey clients as a result of allegations that the firm's securities dealers did not disclose risks of the ARS market.
The auction rate securities market failed in early 2008 leading to illiquidity and lower interest rates than those allegedly promised to investors.
"This settlement with the Bureau of Securities holds Merrill Lynch accountable for how it marketed auction rate securities without fully revealing the risks to investors," Dow said.
Merrill Lynch will pay $4,871,620 in civil penalties to the Bureau of Securities under the consent order. The fine represents the state's pro-rata share of a settlement negotiated by a multi-state task force of state regulators formed by the North American Securities Administrators Association.
The investigation into Merrill Lynch comes as part of a larger, state-led effort meant to address problems in connection with auction-rate securities investments.
State offices began receiving complaints from investors nationwide beginning in early 2008 that resulted in 12 states, including New Jersey, forming a task force to investigate if companies systematically misled investors when placing them in auction rate securities.