Security regulators in Massachusetts have charged Merrill Lynch with fraud for allegedly promoting the sale of auction-rate securities when they knew the investments were risky.
The administrative complaint filed Thursday by Secretary of State William Galvin claims Merrill Lynch, Pierce, Fenner & Smith, the company's main subsidiary, aggressively sold the securities while downplaying the risks.
Auction-rate securities have their interest rates set at periodic auctions. The investments were once considered safe, but the market collapsed in February amid credit-market turmoil.
The complaint seeks an order for Merrill Lynch to make restitution to investors and pay an administrative fine.
The New York-based company did not immediately return a call seeking comment.
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