Merrill Lynch has agreed to pay more than $131 million to settle Securities and Exchange Commission (SEC) charges that it lied about details of some of its structured financial products.
According to the regulators’ charges, disclosures investors received about two of the financial advisory firm’s collateralized debt obligations (CDO) were inaccurate. Merrill Lynch did not tell investors about the role of a third-party hedge fund that had “significant influence” over the CDO, the SEC alleged.
{mosads}“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,” said George Canellos, co-director of the SEC’s enforcement division, in a statement.
The firm also kept flawed books about a third CDO by delaying making records of some trades.
“Keeping adequate books and records is not an elective requirement of the federal securities laws, and broker-dealers who fail to properly record transactions will be held accountable for their violations,” said Andrew Calamari, head of the SEC’s New York office.
The incidents happened in 2006 and 2007, before Bank of America bought Merrill Lynch in 2008.
In a statement, Bank of America spokesman Bill Halldin said the company was “pleased to resolve this matter” with regulators.