Massachusetts Claims Merrill Lynch Defrauded Investors
Massachusetts regulators filed civil fraud charges against New York-based Merrill Lynch & Co. on July 31 for allegedly claiming that risky auction-rate securities were stable.
The 80-page complaint, filed by the Massachusetts Securities Division, claims that Merrill “co-opted” its research department to help sell the securities. Massachusetts Secretary of State William Galvin said in a statement:
“This company was aggressively selling ARS to investors and its auction desk was censoring the research analysts to make sure they downplayed ARS market risks in research reports up to the day Merrill pulled the plug on its auctions. They knew the auction markets were in trouble, but the investors were the last to know.”
The state wants Merrill to make good on the now-frozen auctions and to reimburse investors who sold the instruments at a loss.
Auction-rate securities are municipal or corporate debt securities or preferred stocks that pay interest at rates set through periodic auctions. The instruments typically have long-term maturity dates or no maturity date.
In mid-February, the auctions for the investment instruments failed. That meant investors were unable to sell their securities. To this day, auction-rate securities investors find themselves owning frozen assets.
Carey & Danis has filed class action lawsuits on behalf of persons who purchased auction-rate securities. Investors who wish to discuss their rights against any broker-dealer may contact Carey & Danis toll-free at 800-721-2519 or fill out our online contact form.
