According to advisorhub online, Merrill Lynch has agreed to stop fighting the claims of more than 60 former managers seeking more than $1 billion in the Financial Industry Regulatory Authority (FINRA) arbitration forum. On March 27th, Merrill, according to a spokesperson, dismissed its efforts obtain preliminary injunctions in nine federal district courts that would have precluded arbitration. Generally, firms like Merrill require their own customers and employees to bring these claims to arbitration, where they feel they can receive more favorable hearings than in a court. Lawyers for former employees have asked the Securities and Exchange Commission (SEC) “to review whether the bank’s withholding of the former employees’ signed arbitration agreements in the proceedings to date violates securities laws and are filing motions for monetary sanctions to cover the costs and expenses of appeals Merrill sought in federal courts.” The former employees with Merrill allege to have lost $400 million in the value of their company stock due to the firm’s undisclosed exposure to subprime mortgages and mortgage-backed securities that tanked during 2008. They are bringing their claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), which could allow awards of triple the underlying damages. The number of former managers is now over 60 individuals who are bringing claims against the bank.
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