Mass. regulators accuse Merrill Lynch of fraud

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AP, via Yahoo!:



Mass. regulators accuse Merrill Lynch of fraud
Thursday July 31, 12:40 pm ET
By Denise Lavoie, Associated Press Writer

Mass. regulators file fraud complaint against Merrill Lynch over auction-rate securities


BOSTON (AP) -- Massachusetts security regulators accused Merrill Lynch of fraud Thursday for allegedly promoting the sale of auction-rate securities when they knew the investments were becoming increasingly unstable.

The administrative complaint filed by Secretary of State William Galvin claims Merrill Lynch, Pierce, Fenner & Smith -- the main subsidiary of Merrill Lynch & Co. -- aggressively sold the securities while downplaying the risks.

Auction-rate securities have their interest rates set at periodic auctions, depending on the submitted bids. The investments were once considered safe, but the market collapsed in February amid turmoil in the credit markets.

The market's failure left many investors with their cash frozen as buyers dried up.

New York-based Merrill Lynch denied it defrauded investors.

"We are disappointed that Massachusetts filed this action because it ignores the only reason our advisers sold auction rate securities: they believed they were good investments for clients willing to trade some liquidity for higher return," the company said in its statement. ......(more)

The complete piece is at: http://biz.yahoo.com/ap/080731/merrill_lynch_fraud.html