Merrill plans $10 billion ARS buyback

The nation's largest brokerage firm will buy securities held by 30,000 clients.
AUG 07, 2008
By  Bloomberg
A flurry of legal agreements and actions involving the sale of auction rate securities on Thursday was capped off when Merrill Lynch & Co. Inc. of New York said that it will offer to buy back the moribund securities at par value that it sold to its retail clients. Merrill Lynch, the largest U.S. retail brokerage, has more than 30,000 clients who hold municipal, closed-end fund and student loan auction rate securities. Those clients currently hold more than $12 billion in auction rate securities, but the firm expects the value to be $10 billion when the buyback begins. Merrill Lynch will begin the buyback on January 15, and said it will last one-year. The company, however, did not announce a formal settlement with regulators over the issue. Earlier in the day, Citigroup Inc. said it would buy back more than $7 billion in illiquid auction rate securities and pay a $100 million fine to settle charges it fraudulently misled investors about the debt’s risk. Both the Citigroup settlement and Merrill’s offer are for retail investors, not institutions. Also late on Thursday, Bank of America Corp. of Charlotte, N.C., said it received subpoenas from federal and state regulators over auction rate debt.

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