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Merrill settles with SEC
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August 24, 1998: 2:07 p.m. ET
Investment firm agrees to pay $2M penalty to settle Orange County case
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NEW YORK (CNNfn) - Merrill Lynch & Co. Inc. agreed Monday to pay a $2 million civil penalty to settle a case relating to the bankruptcy of Orange County, Calif., according to the company and the Securities and Exchange Commission.
The SEC said in a statement that the settlement marks the first time the SEC "has placed blame for misleading disclosure squarely on an underwriter for failing to convey vital information about an offering to the firm's investment bankers."
The commission had charged Merrill Lynch with negligence as well as deceptive, dishonest and unfair practices regarding the firm's underwriting of $875 million in municipal securities issued by Orange County and the Orange County Flood Control District.
Merrill Lynch underwrote those notes through four offerings in July and August 1994, a few months before the county government filed for bankruptcy.
As part of the settlement, the SEC ordered Merrill Lynch to cease and desist from committing further violations of federal securities laws and to "maintain new policies and procedures related to municipal underwriting."
The commission said the $2 million penalty is one of the largest amounts ever assessed for non-intentional fraudulent conduct.
In a statement, Merrill Lynch said it made the settlement "without admitting or denying any wrong doing."
The SEC settlement pales in comparison to the $400 million Merrill Lynch agreed to pay Orange County to settle a civil lawsuit. Orange County made the largest municipal bankruptcy filing ever in December 1994 after a bad bet on the direction of interest rates wiped $1.67 billion out of its investment pool.
Merrill Lynch (MER) shares were unchanged at 84-1/8 in midday trading. 
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