State reaches settlement with Merrill Lynch

JEFFERSON CITY, Mo. -- Investment brokerage Merrill Lynch will pay more than $900,000 in fines to two state funds as part of a settlement reached with Missouri Secretary of State Matt Blunt.

Blunt's office was investigating the firm for alleged conflicts of interest between its investment banking and investment rating arms.

"I believe that investment bankers improperly influenced the ratings for 51 stock offerings covered by the Internet Research Group at Merrill Lynch," Blunt said Wednesday.

Blunt alleged -- and Merrill Lynch denied -- the company had listed the 51 companies' stocks as a "buy" or "strong buy" rating in exchange for the companies doing their investment banking through Merrill Lynch.

During the three-year period of 1999 through 2001, the Internet Research Group never once issued a "sell" advisory, said Doug Ommen, Blunt's securities commissioner.

"We can't recoup losses," Ommen said. "The point is that we identified a loss, we recognized that there is a specific number of losses found by Merrill Lynch's conflict and there is a certain number that will help (investors) regain their losses."

Missouri investors who believe they were affected in the case may go to arbitration with Merrill Lynch and may get assistance from Blunt's office.

Merrill Lynch must pay $741,000 in civil fines to the state, which will go toward public schools. The firm must also pay $185,000 to a fund in Blunt's office that helps educate investors.

Merrill Lynch did not immediately return a phone call seeking comment Wednesday.

The investment firm had faced lawsuits from many states on the alleged conflict of interest.

Last May, Merrill Lynch agreed to pay up to $100 million in fines to settle a related investigation begun by New York state officials. But Missouri didn't sign on to that agreement, holding out for Blunt's new agreement.

"Secretary Blunt did not sign off (on the original settlement) because it contained no provisions for investors who were harmed by these analysts' conflicts," said Spence Jackson, Blunt's spokesman.

Jackson said the Missouri agreement was better because it found facts that will help investors in obtaining restitution if they wish to do so.

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On the Net:

Secretary of State Matt Blunt: http://www.sos.state.mo.us/securities

Merrill Lynch: http://www.ml.com