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Wednesday, March 28, 2007

NYSE Should Follow the Merrill Market-Timing Trail Wherever it Goes

Finally the market-timing bonanza and the rush to judgment by Eliot Spitzer is coming home to roost. Yesterday a decision issued by the U.S. District Court in Manhattan rejected an appeal by Merrill Lynch which sought to vacate an arbitration decision to award $14 million to three brokers now known as the "CBS Group," who were dismissed and allegedly defamed after participating in market-timing activities while in the firm’s employ.

This was largely a technical legal victory, but its an important step towards affirming that many of the dismissed brokers involved in market timing were scapegoated by Wall Street firms eager to appease Spitzer with minimal fines, sacrificial lambs and, of course, the ability to neither admit or deny guilt.

It should also be interesting to see how the recent investigation opened up by the NYSE into the trio’s former manager at the Paramus, N.J. branch of UBS AG shakes out. The manager was recently fined $50,000 for failing to supervise three unnamed financial advisers involved in market timing. It doesn’t take a snoop to come to the conclusion that the CBS Group was also participating in market-timing with management’s blessing at their former employer.

It is my hope that the NYSE continues its investigation as far up the ladder as is justified even if it means more heads must roll. Clearly market-timing was not a "rogue" issue but a strategy well embedded in Wall Street’s most prestigious firms.


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