PRESS RELEASE FOR IMMEDIATE RELEASE
Contact: James B. Ropp – Securities Commissioner
Attorney General’s Office, Division of Securities
Phone: (302) 577-8925
Date: November 26, 2002
MERRILL LYNCH PAYS $500,000 FINE TO SETTLE RESEARCH ANALYST CONFLICT OF INTEREST CASE
(Wilmington, DE): Attorney General M. Jane Brady announces that her Securities Division has entered into an agreement with brokerage firm Merrill Lynch, Pierce, Fenner & Smith, which resolves Delaware’s portion of a multi-state investigation examining research analyst conflicts of interest and claims of biased research.
"This agreement requires a significant change in the way Merrill Lynch does business. Consumers will be better served by these requirements," commented Attorney General Brady.
As part of the agreement, Merrill Lynch, Pierce, Fenner & Smith ("Merrill") paid $500,000 to the State of Delaware Investor Protection Fund. The Fund is a source of funding for enforcement of The Delaware Securities Act and enforcement actions involving investment frauds and scams as well as funding for investor education programs.
Individual investors can seek restitution for any harm they believe was caused by Merrill research by initiating an arbitration action or civil suit. For information on how to file an arbitration claim, investors can access the North American Securities Dealer Association (NASD) website at www.NASD.com or by telephone at (215) 665-1180.
In addition to the imposition of a fine, the settlement agreement requires Merrill to enact certain reforms and safeguards to prevent and prohibit future conflict of interest situations between Merrill’s investment banking group and its research analyst group. These reforms include:
These safeguards included in the agreement are intended to eliminate the conflicts of interest between investment banking interests and research analysts and are intended to prevent attempts by investment bankers to influence research reports.
The Delaware Securities Division is participating in a multi-state task force investigating similar conduct by other brokerage firms. It is expected that these investigations will result in similar reforms ensuring investment research free of bias and conflicts of interest.