Merrill Lynch Settles on SEC Claim

By Hunter Douglas
Bloomberg News
August 16, 2005

Merrill Lynch & Co., the world's third-largest securities firm, agreed to pay $10 million to settle claims it failed to deliver prospectuses to investors, the New York Stock Exchange wrote in a statement yesterday. The fine, which Merrill disclosed in March, is the second-largest levied by the exchange. In December, Morgan Stanley paid $13 million to settle accusations that it also failed to deliver prospectuses, which are documents that explain the terms and goals of investments such as securities and mutual funds.

From October 2002 to March 2004, Merrill failed to deliver prospectuses in 64,000 transactions involving registered, open-ended mutual-fund securities, the exchange said. New York-based Merrill also failed to deliver documents for about 275 accounts involving auction-rate preferred stocks, retain certain e-mails and update employee information, the exchange said.

"The delivery of a prospectus to a potential investor is the foundation of investor protection," Richard Ketchum, chief regulatory officer for the exchange, wrote. "More than just a sales document, the prospectus talks about risks." Merrill didn't admit or deny the allegations, spokesman Mark Herr said. He said "coding problems" caused some investors not to receive prospectuses.

Labels: Morgan Stanley