The New York Stock Exchange said it fined Merrill Lynch & Co. $625,000 for not preventing a former research analyst and a saleswoman from telling select clients of a planned company downgrade before its official release.
“The firm failed to adhere to the principles of good business practices in that it failed to prevent the premature dissemination by its employees of an analyst’s changes in ratings and earnings estimates,” the NYSE said in a disciplinary action dated March 8 and recently posted on its Web site.
Merrill neither admitted nor denied guilt in the settlement with the NYSE and agreed to a censure and the fine, the exchange said.
In July 2002, after receiving approval for a ratings change but prior to the public release of the report, the analyst disclosed at a meeting and on a conference call with clients information relating to a planned downgrade, the NYSE said.
After the meeting, the saleswoman also informed several institutional clients that she believed a downgrade was on the way, leading the customers to sell shares prior to the release of the ratings change, according to the NYSE.