Near Miss For Merrill Funds
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Tuesday, May 07, 2002

Near Miss For Merrill Funds

Eliot Spitzer, New York State's Attorney General, came frighteningly close to shutitng down Merrill Lynch's mutual fund business. And it was completely by accident.

Spitzer got a court order against Merrill in order that the firm disclose more information about its "buy", "sell", and "hold" recommendations, according to an article in USA Today. But in so doing, he unwittingly triggered the Investment Company Act. This act would disqualify Merrill from managing its clients' mutual fund assets. Not only that, eight analysts, including Henry Blodget, would have been prevented from performing their jobs as well even if they moved to another firm.

Usually, the SEC waives such penalties, but Spitzer sought his injunction without consulting the federal organization. Merrill went full court press to get the injuntion lifted.

Nonetheless, hearings are looming for Mother Merrill on issues of conflicts of interest between analysts and investment bankers.

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