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Merrill (officially Merrill Lynch, Pierce, Fenner & Smith Incorporated), previously branded Merrill Lynch, is an American investment management and wealth management division of
Bank of America The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...
. Along with BofA Securities, the investment banking arm, both firms engage in prime brokerage and broker-dealer activities. The firm is headquartered in
New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
, and once occupied the entire 34 stories of
250 Vesey Street 250 Vesey Street, formerly Four World Financial Center, is one of four towers that comprise the Brookfield Place complex in the Financial District of Lower Manhattan in New York City. Rising 34 floors and , it is situated between the Hudson Ri ...
, part of the Brookfield Place complex in
Manhattan Manhattan (), known regionally as the City, is the most densely populated and geographically smallest of the five boroughs of New York City. The borough is also coextensive with New York County, one of the original counties of the U.S. state ...
. Merrill employs over 14,000 financial analysts and manages $2.3 trillion in client assets. The company also operates
Merrill Edge Merrill may refer to: Places in the United States *Merrill Field, Anchorage, Alaska *Merrill, Iowa * Merrill, Maine * Merrill, Michigan * Merrill, Mississippi, an unincorporated community near Lucedale in George County *Merrill, Oregon *Merrill, W ...
, an electronic trading platform. Prior to 2009, the company was publicly owned and traded on the
New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
. Merrill Lynch & Co. agreed to be acquired by Bank of America on September 14, 2008, at the height of the
financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of ...
, the same weekend that
Lehman Brothers Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, ...
was allowed to fail. The acquisition was completed in January 2009 and Merrill Lynch & Co., Inc. was merged into Bank of America Corporation in October 2018, with certain Bank of America subsidiaries continuing to carry the Merrill Lynch name, including the broker-dealer Merrill Lynch, Pierce, Fenner & Smith. In 2019, Bank of America rebranded the unit to "Merrill". Merrill Lynch rose to prominence on the strength of its network of financial advisors, sometimes referred to as the "thundering herd", that allowed it to place securities it underwrote directly. In contrast, many established Wall Street firms, such as
Morgan Stanley Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
, relied on groups of independent brokers for placement of the securities they underwrote. It was once known as the "Catholic" firm of Wall Street and most of its executives were Irish Catholics.


History


Founding and early history

The company was founded on January 6, 1914, when Charles E. Merrill opened Charles E. Merrill & Co. for business at 7 Wall Street in
New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
. A few months later, Merrill's friend, Edmund C. Lynch, joined him, and in 1915 the name was officially changed to ''Merrill, Lynch & Co.'' At that time, the firm's name included a
comma The comma is a punctuation mark that appears in several variants in different languages. It has the same shape as an apostrophe or single closing quotation mark () in many typefaces, but it differs from them in being placed on the baseline ...
between ''Merrill'' and ''Lynch'', which was dropped in 1938. In 1916,
Winthrop H. Smith Winthrop Hiram "Win" Smith (June 30, 1893 – January 10, 1961) was an American businessman and investment banker. He was notable as a name partner of Merrill Lynch, Pierce, Fenner & Smith. Biography He was born on June 30, 1893, in South Hadl ...
joined the firm. In 1921, the company purchased Pathé Exchange, which later became RKO Pictures. In 1926, the firm acquired a controlling interest in Safeway Inc., transforming the small grocery store into the country's third-largest grocery store chain by the early 1930s. In 1930, Charles E. Merrill led the firm through a major restructuring, spinning-off the company's retail brokerage business to E. A. Pierce & Co. to focus on investment banking. Along with the business, Merrill also transferred the bulk of its employees, including Edmund C. Lynch and
Winthrop H. Smith Winthrop Hiram "Win" Smith (June 30, 1893 – January 10, 1961) was an American businessman and investment banker. He was notable as a name partner of Merrill Lynch, Pierce, Fenner & Smith. Biography He was born on June 30, 1893, in South Hadl ...
. Charles Merrill received a minority interest in E.A. Pierce in the transaction. Throughout the 1930s, E.A. Pierce remained the largest brokerage in the U.S. The firm, led by
Edward A. Pierce Edward Allen Pierce (August 31, 1874 – December 16, 1974) was an American businessman and stock broker. Pierce was most notable for leading the firm of A.A. Housman & Company through the 1920s and 1930s and turning the firm into the largest bro ...
, Edmund Lynch and Winthrop Smith proved to be one of the most innovative in the industry, introducing IBM machines into the business's record keeping. Additionally, by 1938, E.A. Pierce controlled the largest wire network with a private network of over 23,000 miles of
telegraph Telegraphy is the long-distance transmission of messages where the sender uses symbolic codes, known to the recipient, rather than a physical exchange of an object bearing the message. Thus flag semaphore is a method of telegraphy, whereas ...
wires. These wires were typically used for
orders Order, ORDER or Orders may refer to: * Categorization, the process in which ideas and objects are recognized, differentiated, and understood * Heterarchy, a system of organization wherein the elements have the potential to be ranked a number of ...
. Despite its strong position in the market, E.A. Pierce was struggling financially in the 1930s and was thinly capitalized. Following the death of Edmund C. Lynch in 1938, Winthrop Smith began discussions with Charles E. Merrill, who owned a minority interest in E.A. Pierce about a possible merger of the two firms. On April 1, 1940, Merrill Lynch, merged with
Edward A. Pierce Edward Allen Pierce (August 31, 1874 – December 16, 1974) was an American businessman and stock broker. Pierce was most notable for leading the firm of A.A. Housman & Company through the 1920s and 1930s and turning the firm into the largest bro ...
's E. A. Pierce & Co. and Cassatt & Co., a Philadelphia-based brokerage firm in which both Merrill Lynch and E.A. Pierce held an interest. and was briefly known as ''Merrill Lynch, E. A. Pierce, and Cassatt.'' The company became the first on Wall Street to publish an annual fiscal report in 1941. In 1941, Merrill Lynch, E. A. Pierce, and Cassatt merged with Fenner & Beane, a New Orleans-based investment bank and commodities company. Throughout the 1930s, Fenner & Beane was consistently the second largest securities firm in the U.S. The combined firm, which became the clear leader in securities brokerage in the U.S., was renamed ''Merrill Lynch, Pierce, Fenner & Beane.''


Post-war years

In 1952, the company formed Merrill Lynch & Co. as a
holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
and officially incorporated after nearly half a century as a partnership. On December 31, 1957, ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' referred to that name as "a sonorous bit of Americana" and said, "After sixteen years of popularizing t Merrill Lynch, Pierce, Fenner, and Beane is going to change it—and thereby honor the man who has been largely responsible for making the name of a brokerage house part of an American saga,"
Winthrop H. Smith Winthrop Hiram "Win" Smith (June 30, 1893 – January 10, 1961) was an American businessman and investment banker. He was notable as a name partner of Merrill Lynch, Pierce, Fenner & Smith. Biography He was born on June 30, 1893, in South Hadl ...
, who had been running the company since 1940. The merger made the company the largest securities firm in the world, with offices in more than 98 cities and membership on 28 exchanges. At the start of the firm's fiscal year on March 1, 1958, the firm's name became "Merrill Lynch, Pierce, Fenner & Smith" and the company became a member of the
New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
."Revising a Sonorous Piece of Americana: Merrill Lynch, Pierce, Fenner and Smith." ''The New York Times'', December 31, 1957, p. 29 In 1964, Merrill Lynch acquired C. J. Devine & Co., the leading dealer in U.S. Government Securities. The merger came together due to the death of Christopher J. Devine in May 1963. The C. J. Devine & Co. partners, referred to as "The Devine Boys", formed Merrill Lynch Government Securities Inc., giving the firm a strong presence in the government securities market. The Government Securities business brought Merrill Lynch the needed leverage to establish many of the unique money market products and government bond mutual fund products, responsible for much of the firm's growth in the 1970s and 1980s. In June 1971, the company became a
public company A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange ( ...
via an
initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...
, a year after the
New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
allowed member firms to become publicly-owned. It was a
multinational corporation A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...
with over US$1.8
trillion ''Trillion'' is a number with two distinct definitions: *1,000,000,000,000, i.e. one million million, or (ten to the twelfth power), as defined on the short scale. This is now the meaning in both American and British English. * 1,000,000,000,00 ...
in client assets operating in more than 40 countries around the world. In 1977, the company introduced its Cash management account (CMA), which enabled customers to transfer all their cash into a money market fund, and included check-writing capabilities and a
credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the ...
. In 1978, it significantly buttressed its securities underwriting business by acquiring White Weld & Co., a small but prestigious old-line investment bank. In the late 1990s, Maxim Shashenkov (russian: Максим Шашенков), who was in charge of Alfa-Bank's Alfa Securities Ltd, London, of the Alfa Group of companies, was formerly Vice President for Russia of the London branch of Merrill Lynch.


Canadian operations in the 1990s

In 1990, the company sold its Canadian private client operations to
CIBC Wood Gundy CIBC Wood Gundy is the Canadian full-service retail brokerage division of CIBC World Markets Inc., a subsidiary of the Canadian Imperial Bank of Commerce (CIBC). Through its network of over 1,000 investment advisors working in 80 locations acros ...
. In June 1998, Merrill Lynch re-entered the Canadian investment business with its purchase of
Midland Walwyn Inc Midland may refer to: Places Australia * Midland, Western Australia Canada * Midland, Albert County, New Brunswick * Midland, Kings County, New Brunswick * Midland, Newfoundland and Labrador * Midland, Ontario India * Midland Ward, Kohima, Naga ...
. At the time,
Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by to ...
was the seventh-largest market for personal investment. In December 2001, Merrill Lynch sold Midland Walwyn to CIBC Wood Gundy.


Investment in TMS Entertainment (2003)

In 2003, Merrill Lynch became the second-largest shareholder of Japanese animation studio
TMS Entertainment , formerly known as the , also known as or , is a Japanese animation studio established on October 22, 1946. TMS is one of the oldest and most famous anime studios in Japan, best known for numerous anime franchises such as '' Lupin the Third' ...
. In a report to the Finance Ministry, the Merrill Lynch group said it had acquired a 7.54% stake in TMS by purchasing 3.33 million shares. Merrill Lynch purchased the stake purely for investment purposes and had no intention of acquiring control of the firm's management.


Subprime mortgage crisis

In November 2007, Merrill Lynch announced it would write-down $8.4 billion in losses associated with the
subprime mortgage crisis The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the col ...
, and terminated
E. Stanley O'Neal Earnest Stanley O'Neal (born October 7, 1951) is an American business executive who was formerly chairman and chief executive of Merrill Lynch having served in numerous senior management positions at the company prior to this appointment. O'Neal ...
as its chief executive. O'Neal had earlier approached Wachovia for a merger, without prior Board approval, but the talks ended after O'Neal's dismissal. Merrill Lynch named
John Thain John Alexander Thain (born May 26, 1955) is an American businessman, investment banker, and former chair and CEO of the CIT Group. Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America ...
as its new CEO that month. In his first days at work in December 2007, Thain made changes in Merrill Lynch's top management, announcing that he would bring in former
New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
(NYSE) colleagues such as
Nelson Chai Nelson Joosuk Chai (born 1965) is an American investment banker and financial executive. He formerly served as the chief financial officer of American financial services company Merrill Lynch and briefly as Bank of America's president for the As ...
as CFO and
Margaret D. Tutwiler Margaret DeBardeleben Tutwiler (born December 28, 1950) is an American politician who has served multiple different positions within the United States Department of State. Early life and career Tutwiler was born in Birmingham, Alabama, the daugh ...
as head of communications. Later that month, the firm announced it would sell its commercial finance business to
General Electric General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable ene ...
, and would sell shares of its stock to Temasek Holdings, a
Singapore Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, bor ...
government investment group, in an effort to raise capital. The deal raised more than $6 billion. In July 2008, Thain announced $4.9 billion fourth-quarter losses for the company from defaults and bad investments in the ongoing mortgage crisis. In one year between July 2007 and July 2008, Merrill Lynch lost $19.2 billion, or $52 million daily. The company's stock price had also declined significantly during that time. Two weeks later, the company announced the sale of select hedge funds and securities in an effort to reduce their exposure to mortgage-related investments. Temasek Holdings agreed to purchase the funds and increase its investment in the company by $3.4 billion. Then- New York Attorney General
Andrew Cuomo Andrew Mark Cuomo ( ; ; born December 6, 1957) is an American lawyer and politician who served as the 56th governor of New York from 2011 to 2021. A member of the Democratic Party, he was elected to the same position that his father, Mario Cuo ...
threatened to sue Merrill Lynch in August 2008 over its misrepresentation of the risk on mortgage-backed securities. A week earlier, Merrill Lynch had offered to buy back $12 billion in auction-rate debt and said it was surprised by the lawsuit. Three days later, the company froze hiring and revealed that it had charged almost $30 billion in losses to its subsidiary in the United Kingdom, exempting them from taxes in that country. On August 22, 2008, CEO John Thain announced an agreement with the
Massachusetts Secretary of the Commonwealth The Massachusetts Secretary of the Commonwealth is the principal public information officer of the government of the U.S. state of Massachusetts. The Secretary of the Commonwealth oversees the Corporations Division, the Elections Division, the ...
to buy back all auction-rate securities from customers with less than $100 million in deposit with the firm, beginning in October 2008 and expanding in January 2009. On September 5, 2008
Goldman Sachs Goldman Sachs () is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, Ho ...
downgraded Merrill Lynch's stock to "conviction sell" and warned of further losses at the company. Bloomberg reported in September 2008 that Merrill Lynch had lost $51.8 billion on mortgage-backed securities as part of the subprime mortgage crisis.


CDO losses

Merrill Lynch, like many other banks, became heavily involved in the mortgage-based collateralized debt obligation (CDO) market in the early 2000s. According to an article in ''Credit'' magazine, Merrill's rise to be the leader of the CDO market began in 2003 when Christopher Ricciardi brought his CDO team from Credit Suisse First Boston to Merrill. To provide a ready supply of mortgages for the CDOs, Merrill purchased First Franklin Financial Corp., one of the largest subprime lenders in the country, in December 2006. Between 2006 and 2007, Merrill was "lead underwriter" on 136 CDOs worth $93 billion. By the end of 2007, the value of these CDOs was collapsing, but Merrill had held onto portions of them, creating billions of dollars in losses for the company. In mid-2008, Merrill sold a group of CDOs that had once been valued at $30.6 billion to Lone Star Funds for $1.7 billion in cash and a $5.1 billion loan. In April 2009, bond insurance company MBIA sued Merrill Lynch for fraud and five other violations. These were related to the credit default swap "insurance" contracts Merrill had bought from MBIA on four of Merrill's mortgage-based collateralized debt obligations. These were the "ML-Series" CDOs, Broderick CDO 2, Highridge ABS CDO I, Broderick CDO 3, and Newbury Street CDO. MBIA claimed, among other things, that Merrill defrauded MBIA about the quality of these CDOs, and that it was using the complicated nature of these particular CDOs (CDOs squared and cubed) to hide the problems it knew about in the securities that the CDOs were based on. However, in 2010 Justice Bernard Fried disallowed all but one of the charges: the claim by MBIA that Merrill had committed
breach of contract Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other part ...
by promising the CDOs were worthy of an AAA rating when, it alleges, in reality, they weren't. When the CDOs lost value, MBIA wound up owing Merrill a large amount of money. Merrill disputed MBIA's claims. In 2009, Rabobank sued Merrill over a CDO named Norma. Rabobank later claimed that its case against Merrill was very similar to the SEC's fraud charges against
Goldman Sachs Goldman Sachs () is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, Ho ...
and its Abacaus CDOs. Rabobank alleged that a hedge fund named Magnetar Capital had chosen assets to go into Norma, and allegedly bet against them, but that Merrill had not informed Rabobank of this fact. Instead, Rabobank alleges that Merrill told it that NIR Group was selecting the assets. When the CDO value tanked, Rabobank was left owing Merrill a large amount of money. Merrill disputed the arguments of Rabobank, with a spokesman claiming "The two matters are unrelated and the claims today are not only unfounded but weren't included in the Rabobank lawsuit filed nearly a year ago".


Sale to Bank of America

Significant losses were attributed to the drop in value of its large and unhedged mortgage portfolio in the form of collateralized debt obligations. Trading partners' loss of confidence in Merrill Lynch's solvency and ability to refinance money market obligations ultimately led to its sale. During the week of September 8, 2008,
Lehman Brothers Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, ...
came under severe liquidity pressures, with its survival in question. If Lehman Brothers failed, investors were afraid that the contagion could spread to the other surviving investment banks. On Sunday, September 14, 2008,
Bank of America The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...
announced it was in talks to purchase Merrill Lynch for $38.25 billion in stock. Later that day, Merrill Lynch was sold to Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share, or about US$50 billion or $29 per share. This price represented a 70.1% premium over the September 12 closing price or a 38% premium over Merrill's book value of $21 a share, but a discount of 61% from its September 2007 price. Congressional testimony by Bank of America CEO Kenneth Lewis, as well as internal emails released by the House Oversight Committee, indicated that the merger was transacted under pressure from federal officials, who said that they would otherwise seek the replacement of Bank of America's management as a condition of any government assistance. In March 2009, it was reported that in 2008, Merrill Lynch received billions of dollars from its insurance arrangements with AIG, including $6.8 billion from funds provided by the United States government to bail out AIG.


Post-merger with Bank of America

After merging Merrill Lynch into its businesses,
Bank of America The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...
continued to operate Merrill Lynch for its wealth management services and integrated Merrill Lynch's investment bank into the newly formed BofA Securities.


Launch of Merrill Edge

On June 21, 2010, the company launched
Merrill Edge Merrill may refer to: Places in the United States *Merrill Field, Anchorage, Alaska *Merrill, Iowa * Merrill, Maine * Merrill, Michigan * Merrill, Mississippi, an unincorporated community near Lucedale in George County *Merrill, Oregon *Merrill, W ...
, an electronic trading platform.


Rebranding

In February 2019, Bank of America announced the division was to be rebranded from "Merrill Lynch" to "Merrill".


Regulatory actions


Orange County settlement

In 1998, Merrill Lynch paid
Orange County, California Orange County is located in the Los Angeles metropolitan area in Southern California. As of the 2020 census, the population was 3,186,989, making it the third-most-populous county in California, the sixth-most-populous in the United States, ...
$400 million to settle accusations that it sold inappropriate and risky investments to former county treasurer Robert Citron. Citron lost $1.69 billion, which forced the county to file for bankruptcy in December 1994. The county sued a dozen or more securities companies, advisors and accountants, but Merrill settled without admitting liability, paying $400 million of a total $600 million recovered by the county.


Analyst Research settlement

In 2002, Merrill Lynch agreed to pay out $100 million for publishing misleading research. As part of the agreement with the New York attorney general and other state securities regulators, Merrill Lynch agreed to increase research disclosure and work to decouple research from investment banking.


Misleading of investors by Henry Blodget

Between 1999 and 2001, during the
dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Comp ...
,
Henry Blodget Henry McKelvey Blodget (born 1966) is an American businessman, investor and journalist. He is notable for his former career as an equity research analyst who was senior Internet analyst for CIBC Oppenheimer and the head of the global Internet ...
, a well-known analyst at Merrill Lynch, gave assessments about stocks in private emails that conflicted with what he publicly published via Merrill. In 2003, he was charged with civil securities fraud by the U.S. Securities and Exchange Commission. He settled without admitting or denying the allegations and was subsequently barred from the securities industry for life. He paid a $2 million fine and $2 million disgorgement.


Enron/Merrill Lynch Nigerian barge

In 2004, convictions of Merrill executives marked the only instance in the
Enron Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional compani ...
investigation where the government criminally charged any officials from the banks and securities firms that allegedly helped Enron execute its accounting scandals. The case revolved around a 1999 transaction involving Merrill, Enron and the sale of some electricity-producing barges off the coast of Nigeria. The charges alleged that the 1999 sale of an interest in Nigerian
power barge Power most often refers to: * Power (physics), meaning "rate of doing work" ** Engine power, the power put out by an engine ** Electric power * Power (social and political), the ability to influence people or events ** Abusive power Power may a ...
by an Enron entity to Merrill Lynch was a sham that allowed Enron to illegally book about $12 million in pretax profit, when in fact there was no real sale and no real profit. Four former Merrill top executives and two former midlevel Enron officials faced conspiracy and fraud charges. The Merrill Lynch executives were convicted, but, unusually, all three of those that appealed subsequently had their charges overturned by the 5th U.S. Circuit Court of Appeals in New Orleans who called the conspiracy and wire fraud charges "flawed." The Justice Department decided not to retry the case after the reversal of the verdict. Merrill reached its own settlement, firing bankers and agreeing to the outside oversight of its structured-finance transactions. It also settled civil fraud charges brought by the U.S. Securities and Exchange Commission, without admitting or denying fault.


Discrimination charges

On June 26, 2007, the U.S. Equal Employment Opportunity Commission (EEOC) brought suit against Merrill Lynch, alleging the firm discriminated against Dr. Majid Borumand because of his
Iranian Iranian may refer to: * Iran, a sovereign state * Iranian peoples, the speakers of the Iranian languages. The term Iranic peoples is also used for this term to distinguish the pan ethnic term from Iranian, used for the people of Iran * Iranian lan ...
nationality and
Islam Islam (; ar, ۘالِإسلَام, , ) is an Abrahamic monotheistic religion centred primarily around the Quran, a religious text considered by Muslims to be the direct word of God (or '' Allah'') as it was revealed to Muhammad, the ...
ic religion, with "reckless disregard" for his protected civil rights. The EEOC lawsuit maintained that violations by the company were intentional and committed with malice. In another case concerning mistreatment of another Iranian employee by Merrill Lynch, on July 20, 2007, a National Association of Securities Dealers arbitration panel ordered the company to pay Fariborz Zojaji, a former Iranian employee, $1.6 million for being fired due to his Persian ethnicity. Merrill Lynch was criticized by both the National Iranian American Council, and the
American-Arab Anti-Discrimination Committee The American-Arab Anti-Discrimination Committee (ADC) states that it is "the largest Arab American grassroots civil rights organization in the United States." According to its webpage it is open to people of all backgrounds, faiths and ethnicities ...
. On August 13, 2008, a New Jersey appeals court rendered a ruling against Merrill Lynch in a lawsuit filed by Darren Kwiatkowski, a gay employee who was called a “stupid fag” by another employee. In August 2013, the company agreed to pay $160 million to settle a
class action A class action, also known as a class-action lawsuit, class suit, or representative action, is a type of lawsuit where one of the parties is a group of people who are represented collectively by a member or members of that group. The class actio ...
racism Racism is the belief that groups of humans possess different behavioral traits corresponding to inherited attributes and can be divided based on the superiority of one race over another. It may also mean prejudice, discrimination, or antagoni ...
lawsuit brought by a longtime U.S. employee in 2005. At the time the lawsuit was filed, 2% of the brokers at the company were
black Black is a color which results from the absence or complete absorption of visible light. It is an achromatic color, without hue, like white and grey. It is often used symbolically or figuratively to represent darkness. Black and white ha ...
, despite a 30-year-old consent decree it had signed with the EEOC that required the company to increase its proportion of black brokers to 6.5%, and despite the fact that in 25 states, the company did not have a single black broker. The funds were available to all black brokers and trainees at the firm since May 2001, estimated to be 700–1,200 people. During the case, Merrill's black CEO,
Stanley O'Neal Earnest Stanley O'Neal (born October 7, 1951) is an American business executive who was formerly chairman and chief executive of Merrill Lynch having served in numerous senior management positions at the company prior to this appointment. O'Neal ...
, said that black brokers may have a harder time getting business for the company since most of its clients were
white White is the lightest color and is achromatic (having no hue). It is the color of objects such as snow, chalk, and milk, and is the opposite of black. White objects fully reflect and scatter all the visible wavelengths of light. White ...
.


Market timing settlement

In March 2005, Merrill Lynch paid a $10 million civil penalty to settle allegations of improper activities at the firm's Fort Lee, New Jersey office. Three financial advisors, and a fourth who was involved to a lesser degree, placed 12,457 trades for Millennium Partners, a client, in at least 521 mutual funds and 63 mutual fund sub-accounts of at least 40 variable annuities. Millennium made profits in over half of the funds and fund sub-accounts. In those funds where Millennium made profits, its gains totalled about $60 million. Merrill Lynch failed to reasonably supervise these financial advisers, whose market timing siphoned short-term profits out of mutual funds and harmed long-term investors.


2008 bonus payments

In 2008, Merrill Lynch arranged for payment $3.6 billion in bonuses, one-third of the money received from the
Troubled Asset Relief Program The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President ...
, for performance that year in what appeared to be "special timing," despite reported losses of $27 billion the same year.


Mismarking

In 2010, a Merrill Lynch trader in London who mismarked positions he had on behalf of the bank by $100 million to cover up his losses was banned by the United Kingdom's Financial Services Authority (FSA) from working in the securities industry in the UK for at least five years.


Misleading customers about trading venues

On 19 June 2018, the U.S. Securities and Exchange Commission (SEC) charged Merrill Lynch of misleading brokerage customers about trading venues between 2008 and 2013. Merrill Lynch admitted wrongdoing and agreed to pay a $42 million penalty.


Improper handling of ADRs

On 22 March 2019, Merrill Lynch agreed to pay more than $8 million to settle charges of improper handling of pre-released American depositary receipts under investigation of the U.S. Securities and Exchange Commission. Merrill Lynch neither admitted nor denied the investigation findings but agreed to pay disgorgement of more than $4.4 million in ill-gotten gains plus $724,000 in prejudgment interest and an additional penalty of $2.89 million.


See also

* Broker-dealer * ''
Calibuso, et al. v. Bank of America Corp., et al. On March 30, 2010, three female employees launched a class action gender discrimination lawsuit against Bank of America and Merrill Lynch. The suit, which was filed by Judy Calibuso, a Miami financial adviser in Merrill Lynch, and Julie Moss and D ...
'' *
Credit crunch A credit crunch (also known as a credit squeeze, credit tightening or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from banks. A credit cr ...
* Liquidity crisis * '' Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit'', a 2006 Supreme Court case involving securities fraud claims. * '' Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning'', a 2016 Supreme Court case involving
naked short selling Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the asset from someone else or ensuring that it can be borrowed. When the seller does not obtain the asset and deliv ...
claims. * List of UK judgments relating to excluded subject matter * Primary dealer


References


Further reading

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Merrill Lynch

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