Merrill Lynch to Pay $11M to Overcharged Mutual Fund Buyers

Merrill Lynch & Co. plans to reimburse about $11 million to buyers of mutual funds it overcharged, The New York Times reported Thursday.

Merrill spokesman Mark Herr told the newspaper that the average reimbursement for the overcharges, including interest, will be about $145. More than 20,000 overcharged customers will receive credits or checks by Dec. 20.

The brokerage company was initially planning to ask investors to fill out a form if they thought they had been overcharged, but instead of waiting the hear from investors, Merrill decided to simply make the payments.

At issue are volume discounts—called breakpoint discounts—given to investors who purchase large blocks of Class A mutual fund shares. The National Association of Securities Dealers (NASD) recently discovered that discounts were not given in about one of five eligible transactions industry-wide, and estimated that at least $85 million is owed to investors for 2001 and 2002 alone.

After regulators began an investigation into fund sales practices, NASD ordered companies to review their transactions. In the case of Merrill Lynch, the company analyzed more than 1 million purchases of Class A shares of mutual funds made since Jan. 1, 2001, and found that customers did not receive the right discounts in about 70,000 cases.

NASD has ordered about 450 securities firms to contact mutual fund investors by the end of January about possible refunds totaling at least $85 million.


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