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Posted by Monitor on August 15, 2008, 9:09 pm
Merrill facing NY lawsuit over securities sale
NY AG to file lawsuit against Merrill Lynch for sale of securities;
Wachovia settles case
NEW YORK (AP) -- New York Attorney General Andrew Cuomo said Friday he
sent a letter to Merrill Lynch & Co. notifying the investment bank
that his office will file suit against it imminently as part of an
investigation into the collapse of the auction-rate securities market.
"We have been trying to resolve the matter," with Merrill, Cuomo said
during a conference call with reporters. Cuomo said he has not been
able to reach a satisfactory agreement with the bank.
The letter sent to Merrill, which was given to reporters by Cuomo's
office, is similar to one Citigroup Inc. received before settling with
the attorney general. Cuomo is one of several regulators investigating
whether financial companies misled investors in the auction-rate
securities market; officials from several other states and the
Securities and Exchange Commission have also been involved in
negotiations with the big banks.
Merrill said in a statement it was surprised to receive a letter about
potential legal action, noting it has held discussions with regulators
since it announced a voluntary repurchase plan.
"We anticipated further talks," Merrill said in the statement.
The expected lawsuit comes a week after Merrill said it would
voluntarily repurchase auction-rate securities from customers. Merrill
said it would buy back securities between Jan. 15, 2009 and Jan. 15,
2010. The bank said the repurchase plan would likely affect 30,000
clients holdings about $10 billion in the securities.
The attorney general's office called the bank's voluntary buyback plan
"woefully inadequate," according to the letter sent to Merrill. The
letter said the attorney general is still open to reaching a
settlement with Merrill, assuming the bank meets similar provisions
agreed upon by other banks reaching settlements.
Cuomo said his office is investigating about 25 financial firms that
were involved in selling the securities. The investigation includes
Goldman Sachs Group Inc. and other underwriters of the securities as
well as retail brokers, Cuomo said.
"We've had discussions with them," Cuomo said of Goldman Sachs.
Cuomo's office has targeted the financial firms with the largest
portfolios of auction-rate securities because settlements with those
companies will affect the most customers.
Earlier Friday, Wachovia Corp. became the fifth bank to settle as part
of the investigation; Wachovia agreed to buy back $8.5 billion of the
securities at face value from investors. The Charlotte, N.C.-based
bank will also pay $50 million in fines to be distributed among
states. The fines will be distributed to states based on the amount of
securities sold to investors in each state.
Over the past eight days, Citigroup, UBS AG, JPMorgan Chase & Co. and
Morgan Stanley agreed to repurchase a combined $32.6 billion in
auction-rate securities and will pay fines totaling $310 million.
Nearly 150,000 customers have been affected by the five settlements.
http://biz.yahoo.com/ap/080815/banks_auction_rate_securities.html
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