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Paula T. Dow,
Acting Attorney General

Bureau of Securities
Marc B. Minor, Chief

For Immediate Release:
April 7, 2010
For Further Information Contact:
Jeff Lamm, 973-504-6327

Merrill Lynch to Pay N.J. $4.87 Million to Settle
Auction Rate Securities Investigation

NEWARK Attorney General Paula T. Dow, Acting Consumer Affairs Director Sharon Joyce and Bureau of Securities Chief Marc B. Minor today announced that the Bureau has signed a final Consent Order that requires Merrill Lynch to complete or confirm its repurchase of auction-rate securities (ARS) from New Jersey clients to settle allegations that the firm’s securities dealers failed to disclose risks of the ARS market.

"This settlement with the Bureau of Securities holds Merrill Lynch accountable for how it marketed auction rate securities without fully revealing the risks to investors," Attorney General Dow said.

Although often marketed and sold to investors as safe, liquid, and cash-like investments, ARS are actually long-term investments subject to a complex auction process that failed in early 2008, resulting in illiquidity and lower interest rates than investors were promised.

"State regulators banded together, combined their resources and worked to hold investors harmless in the wake of this ARS crisis," Acting Director Joyce said. "The New Jersey Bureau of Securities continues its vital work to safeguard the hard-earned monies of investors during these difficult financial times."

"The myriad of investments available to consumers can be confusing and those offering products are obligated to fully disclose all relevant terms and conditions to potential investors," said Bureau Chief Minor. "We will continue to act at the direction of the Attorney General to protect investors when our state securities laws and regulations are violated."

The consent order requires Merrill Lynch to pay $4,871,620 in civil penalties to the Bureau. The fine amount represents the state’s pro-rata share of a settlement negotiated by a multi-state task force of state regulators formed by the North American Securities Administrators Association (NASAA).

The investigation into Merrill Lynch’s role in the marketing of auction rate securities is part of a larger state-led effort to address problems in connection with ARS investments. Early in 2008, state offices began receiving complaints from investors throughout the country. As a result, 12 states, including New Jersey, formed a task force to investigate whether the nation's Wall Street firms had systematically misled investors when placing them in auction rate securities.

BOS Investigating Attorney Peter C. Cole led New Jersey’s efforts in securing this settlement and protecting Garden State investors.

The Bureau of Securities can be contacted toll-free within New Jersey at 1-877-I-INVEST (1-877-446-8378) or from outside New Jersey at 973-504-3600. The Bureau's web site is located at


Consent Order


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