Thursday, December 12, 2013

Merrill to pay $132 million over charges it misled investors

Merrill Lynch will pay $132 million to resolve charges that the firm marketed complex investments to clients using misleading information, the Securities and Exchange Commission announced.

The alleged wrongdoing took place in 2006 and 2007, before the investment  bank was acquired by Bank of America.

According to the SEC, Merrill failed to tell investors in a series of collateralized debt obligations that hedge fund Magnetar Capital LLC had a significant role in deciding what assets backed the securities. Magnetar bought into the CDOs but also hedged its risk by shorting them.

"“Investors did not have the benefit of knowing that a prominent hedge fund firm with its own interests was heavily involved behind the scenes in selecting the underlying portfolios," enforcement division co-director George S. Canellos said in a statement.
Merrill Lynch did not admit to nor deny the SEC's findings.

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