The Securities and Exchange Commission charged Merrill Lynch – now under the umbrella of Bank of America (BAC) – for providing faulty disclosures in relation to collateral backing two collateralized debt obligations.
To settle the issue, Merrill Lynch agreed to pay $131.8 million. Merrill is accused of structuring and marketing the CDOs to investors while maintaining inaccurate books, according to the SEC.
"Merrill Lynch marketed complex CDO investments using misleading materials that portrayed an independent process for collateral selection that was in the best interests of long-term debt investors," said George Canellos, co-director of the SEC’s division of enforcement.
"Investors did not have the benefit of knowing that a prominent hedge fund firm with its own interests was heavily involved behind the scenes in selecting the underlying portfolios."