Merrill Lynch To Pay $2M Penalty

Merrill Lynch & Co. agreed Monday to pay $2 million to settle federal regulators' allegations of negligence arising from the 1994 bankruptcy of Orange County, California.

Merrill, the nation's largest brokerage firm, neither admitted nor denied wrongdoing in the settlement, the latest enforcement action by the Securities and Exchange Commission related to the Orange County case.

The Wall Street giant also agreed to refrain from future violations. Merrill officials did not immediately return a telephone call.

The SEC said it was the first time the market watchdog agency has directly blamed a bond underwriter for misleading its investment bankers by failing to give them vital information about a bond sale. Merrill underwrote $875 million in municipal securities issued by Orange County in July and August 1994.

The $2 million civil penalty is one of the largest it has ever imposed for fraudulent conduct that was not intentional, the SEC said.

Orange County sought federal bankruptcy protection in December 1994 after losing $1.64 billion from its investment pool, a savings bank for schools, cities, water and sewer districts.