Governor Rell Announces $3.5 Million Settlement with Merrill Lynch
March 8, 2005
Governor M. Jodi Rell announced today that Connecticut has reached a $3.5 million settlement with Merrill Lynch to resolve allegations the company failed to supervise its agents and prevent the practice known as “market timing.”
Market timing is the quick turn-around trading of a mutual fund in order to take advantage of the way its shares are priced. It can have a negative effect on a mutual fund by requiring that fund to keep more of its assets readily available, thus limiting its ability to make investments.
Under the terms of the agreement, Merrill Lynch will pay a $1 million fine and contribute $2 million over the next four years to the “Investing Pays Off” financial literacy program – $500,000 of which will be earmarked for programs in state schools.
The company will also pay $500,000 over the next four years to a fund for training Connecticut regulatory and law enforcement personnel in dealing with financial, banking and securities violations.
“This is an appropriate settlement for the wrongdoing by Merrill Lynch, which had a detrimental effect on Connecticut investors,” Governor Rell said. “I’m especially pleased that the bulk of the money will go to further financial literacy programs. The best investor is always an educated investor.
“I’m also pleased with the establishment of a fund to further educate and inform the investigators who deal with these often intricate cases,” the Governor said. “We will continue to pursue civil and criminal violations in the worlds of banking, investing, securities and corporate governance.”
The settlement resolves allegations that, from January 2002 to September 2003, managers in the Fort Lee, N.J., branch office of Merrill Lynch failed to reasonably supervise agents to prevent three individuals from engaging in the practice of market timing, which was prohibited by company policy. The responsible managers have been fined by Merrill Lynch and the three accused individual were terminated.