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Merrill Lynch & Co., Inc. : Auction Rate Securities Summary: The original Complaint alleges that Merrill Lynch violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by deceiving investors about the investment characteristics of auction rate securities and the auction market in which these securities traded. Auction rate securities are either municipal or corporate debt securities or preferred stocks which pay interest at rates set at periodic “auctions.” Auction rate securities generally have long-term maturities or no maturity dates.
The Complaint alleges that, pursuant to uniform sales materials and top-down management directives, Merrill Lynch offered and sold auction rate securities to the public as highly liquid cash-management vehicles and as suitable alternatives to money market mutual funds. According to the Complaint, holders of auction rate securities sold by Merrill Lynch and other broker-dealers have been unable to liquidate their positions in these securities following the decision on February 13, 2008 of all major broker-dealers including Merrill Lynch to “withdraw their support” for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that Merrill Lynch failed to disclose the following material facts about the auction rate securities it sold to the class: (1) the auction rate securities were not cash alternatives, like money market funds, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer; (2) the auction rate securities were only liquid at the time of sale because Merrill Lynch and other broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) Merrill Lynch and other broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions; and (4) Merrill Lynch continued to market auction rate securities as liquid investments after it had determined that it and other broker dealers were likely to withdraw their support for the periodic auctions and that a “freeze” of the market for auction rate securities would result.
On October 31, 2008, Judge Loretta A. Preska consolidated the actions under the caption In re Merrill Lynch Auction Rate Securities Litigation, Master Case File No. 08-cv-3037 (LAP). Further, Judge Preska appointed Gerald Wendel and Robert Berzin as lead plaintiffs and approved the lead plaintiffs' selection of Girard Gibbs LLP as lead counsel for the class. On December 10, 2008, the lead plaintiffs filed a Consolidated Class Action Complaint. The defendants responded by filing a motion to dismiss the Consolidated Class Action Complaint. Before any ruling, the plaintiffs again amended their complaint and filed a First Amended Consolidated Class Action Complaint. On June 12, 2009, the case was accepted as related and coordinated with Multidistrict Litigation, 1:09-md-02030-LAP. On June 19, 2009, Gerald Wendel and Robert Berzin withdrew as lead plaintiffs and were replaced with Plaintiffs Colin Wilson, Ronald Levy, and Michael Bonde. On July 24, 2009, the defendants filed a motion to dismiss the First Amended Consolidated Class Action Complaint. The motion is currently pending before the Court.
INDUSTRY CLASSIFICATION:
SIC Code: 6211
Sector: Financial
Industry: Investment Services
| COMPANY/ISSUER NAME: | Merrill Lynch & Co., Inc. |
| COMPANY/ISSUER TICKER: | MER |
| COMPANY WEBSITE: | http://www.ml.com |
| FIRST IDENTIFIED COMPLAINT IN THE DATABASE | |||||||||||||||||
| Frederick Burton, et al. v. Merrill Lynch & Co., Inc., et al. | |||||||||||||||||
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| DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT | |||
| Class Action Complaint for Violations of Federal Securities Laws - Jury Trial Demanded | |||
| Type: Complaint | Date on the document: 3/25/2008 | ||
| Stipulation And Order Consolidating Actions, Appointing Lead Plaintiffs And Approving Their Selection Of Lead Counsel | |||
| Type: Order Appointing LP/LC | Date on the document: 10/31/2008 | ||
| REFERENCE COMPLAINT | |||||||||||||||||
| In re Merrill Lynch Auction Rate Securities Litigation | |||||||||||||||||
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| DOCUMENTS FOR THE REFERENCE COMPLAINT | |||
| US District Court Civil Docket | |||
| Type: Docket | Date on the document: 09/25/2009 | ||
| OTHER DOCUMENTS | |||
| Class Action Complaint for Violations of Federal Securities Laws - Jury Trial Demanded | |||
| Case Name and/or Number: Richard Stanton, et al. v. Merrill Lynch & Co., Inc., et al. | |||
| Type: Complaint | Date on the document: 3/26/2008 | ||
| Class Action Complaint | |||
| Case Name and/or Number: Frederick Burton, et al. v. Merrill Lynch & Co., Inc., et al. | |||
| Type: Complaint | Date on the document: 01/23/2009 | ||
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