Reuters reports that Merrill Lynch has come down hard and fined two managers who were deemed to be responsible for the three staff it fired last month following allegations of improper mutual funds trading. The firm is anxious to clean house and mop up after the affair. Merrill will hope that it is not dragged further into the scandal that is beginning to overwhelm the US mutual funds industry.
The firm fired three brokers back in October for violating its policy prohibiting rapid-fire trading of mutual-fund shares, a practice known as market timing. Although not illegal, Merrill and most of the fund managment industry banned this kind of trading in 1999 as it was deemed to be disadvantageous to more longer term investors.
The fines now levied on the managers, thought to be around $100,000 - $150,000 each, is another example that Merrill intends to take no prisoners on this issue. The last thing the firm needs is to be dragged into and distracted by another major scandal. Merrill has already weathered Blodgett and Enron. More trouble is most unwelcome, especially as the firm really seems to be getting its act together now on the business front after three difficult years.