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Last week, Regulators in Massachusetts filed a civil complaint against Merrill citing an incident in which the firm and its analysts pitched the securities to investors as the market was breaking up.
According to Merrill, the steps they hope to take is buying back almost $10 billion in auction-rate securities from retail clients.Citigroup Inc. had earlier agreed on a similar move under a settlement with U.S. regulators.
A statement from Merrill said that the York-based firm will pay face value for the securities. The buybacks are expected to begin in January and continue for a whole year.
Ever since Wall Street firms backed away from the market in February, the securities have been frozen in customer accounts leading to serious complaints from the customers. An investigation by the U.S. Securities and Exchange Commission and regulators in New York and Massachusetts was instituted.
Chief Executive Officer of Merrill John Thain said that their clients have been caught in an unprecedented liquidity crisis and that they are solving the problem by giving them the option of selling their positions to Merrill.
The biggest U.S. bank by assets, Citigroup reached agreement with state and federal regulators today to buy back about $7.5 billion in securities from its brokerage clients.
A statement from Merrill said that they will back the auction-rate securities from individual investors, small businesses and charities.
Source Bloomberg
Posted August 7th, 2008 by Odur Joe
