Compliance August 1, 2008

Massachusetts Charges Merrill with Fraud over ARS Sales

The Massachusetts Secretary of the Commonwealth has charged Merrill Lynch&Co. with fraud over charges it marketed auction-rate securities while not accurately disclosing the potential market risks.
Reported by

Secretary William Galvin’s complaint “charges the firm with separate counts of fraud and dishonest and unethical conduct for creating and implementing a sales and marketing scheme which significantly misstates not only the nature of auction rate securities (ARS), but also the overall stability of the auction market, resulting in thousands of investors being abandoned with illiquid investments.:”

“This company was aggressively selling ARS to investors and its auction desk was censoring the research analysts to make sure they downplayed ARS market risks in research reports up to the day Merrill pulled the plug on its auctions,” Galvin told the Wall Street Journal. “They knew the auction markets were in trouble, but the investors were the last to know.”

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

The Massachusetts charges allege Merrill had known for several months that the auction markets faced significant danger of collapsing. The complaint alleges Merrill Lynch made about $90 million from the auction market in 2006 and 2007.

Earlier this week, units of UBS AG disclosed they will pay $4.4 million to settle allegations from the Massachusetts attorney general’s office that the bank misled cities and government agencies into investing in the ARS market (See UBS Plans to Buy Back Auction-Rate Securities).

Massachusetts Attorney General Martha Coakley alleged that a local broker working for UBS misled cities and government agencies into thinking that such securities were as liquid as cash, a legal requirement for government investments in Massachusetts (See UBS Benches Fixed Income Head Amid Auction-Rate Probes).

New York has also filed charges against UBS (See NY Next to Target UBS).

More information about the latest Massachusetts charges against Merrill is available here.

Products July 31, 2008

MetLife Offers Morningstar Resource to Non-ERISA 403(b)s

MetLife Resources has enhanced its suite of solutions for 403(b) plans not subject to the Employee Retirement Income Security Act (ERISA) with the launch of ExpertSelect.
Reported by

ExpertSelect makes available the objective investment expertise of Morningstar Associates, LLC and offers a pre-selected mutual fund lineup designed to help employers with the selection of products for their 403(b) plans, according to a MetLife press release. The product was created specifically for non-ERISA plans and leverages Morningstar Associates’ quantitative and qualitative evaluation to provide a list of screened, high-quality mutual funds representing a wide range of asset classes.

403(b) plan participants can choose from the ExpertSelect list or choose a fixed account option to diversify their 403(b) plan portfolio.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“Offering ExpertSelect along with our variable annuity product – MetLife Financial Freedom Select (MFFS) variable annuity – allows employees to choose which product better suits their needs. Those wanting to invest in mutual funds to save for retirement can choose ExpertSelect and those interested in a product that can generate guaranteed income during retirement can choose MFFS,” said Thomas G. Hogan, Jr., senior vice president and head of MetLife Resources, in the press release.

«