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Merrill Lynch Capital Markets Espana S.A., S.V. has paid Rs 60 lakh to the SEBI as settlement charges to close the case against it in connection with its role in the stock market crash of May 17, 2004.
The case has been settled through consent proceeding, without admission or denial of guilt.
Merrill Lynch was charged by the stock market regulator for failure to provide information called for by the Board and failure to comply with know-your-client (KYC) norms wherein offshore derivative instruments could be issued only to regulated entities.
The information with respect to certain institutional investors were furnished only after repeated follow-ups and investigation was delayed by Merrill Lynch citing client confidentiality provisions (in the client agreement) as the reason for refusal to furnish complete client details, observed the SEBI.
Merrill Lynch applied for settlement through a consent order on November 4, 2009, while proceedings were on and proposed revised terms on September 28, 2010.
The regulator noted that the consent terms were similar to an application by another entity facing similar charges and referred the case to the high powered advisory committee that approves cases for consent.
The committee recommended that the case be settled on the proposed terms on payment of Rs 60 lakh.
The SEBI accepted the recommendations and communicated them to Merrill Lynch on April 15, 2011. The latter paid the money on April 21.
The consent order passed on May 13 came into force with immediate effect and disposed of all proceedings initiated against Merrill Lynch concerning the stock market crash of May 17, 2004.
Reopen case
The regulator retains the right to start or re-open the case against Merrill Lynch in case any representation made by Merrill Lynch is found to be untrue subsequently, or it is found that that consent terms or undertakings filed were breached.
The SEBI had earlier disposed of proceedings against UBS securities, which was found guilty of violating the same FII regulations in the stock market crash of May 17 on payment of Rs 50 lakh as settlement charges on February 21, 2009.
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