Merrill Lynch Follows Citigroup’s Lead- Attempts to Resolve Certain Auction-Rate Securities Claims


Following on the heels of Citigroup’s tentative settlement with federal and state regulators, Merrill Lynch has announced that it will offer to buy-back, at face value, auction-rate securities which were sold to individual investors, charitable institutions and small businesses. Merrill Lynch’s offer will be effective January 15, 2009 and run through January 15, 2010 according to the firm. Merrill has estimated that this offer will cost the firm approximately $10 billion.

Unlike the tentative Citigroup settlement, Merrill’s offer has not been approved by state and federal regulators and may not resolve the firm’s auction-rate securities regulatory issues. In fact, Massachusetts’ Secretary of State, William Galvin, one of the leaders of the state task force investigating the sale of auction-rate securities who recently sued Merrill Lynch over auction-rate securities, stated that “It’s not satisfactory from our point of view in terms of the timeliness of redemption. Therefore, clearly, we’ll pursue our complaint.” Among other things, Merrill still must negotiate any regulatory sanctions.

Under Merrill’s proposal, larger retirement plans, corporations and other institutional investors will be left to fend for themselves with respect to damages which they have sustained as a result of Merrill’s sale of auction-rate securities. This group of investors is believed to have suffered more significant damages than those sustained by individual, charitable and small business investors.

Merrill’s actions may be indicative of the types of settlements that other major Wall Street firms will try to negotiate in the coming days with state and federal regulatory authorities. At present, numerous other firms are the subject of ongoing regulatory investigations. Those firms include the following: Morgan Stanley, Goldman Sachs, Bank of America, JP Morgan Chase, RBC, UBS, Wachovia/A.G. Edwards, Lehman Brothers, Oppenheimer, and Credit Suisse, among others.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and individual investors in auction-rate securities cases. For further information, please contact us.