BofA may dissolve Merrill Lynch

Aug 16, 2013 @ 12:20 pm

By Dan Jamieson

Merrill Lynch & Co., the 99-year-old firm known for its “thundering herd” of brokers pitching stocks to Main Street, may cease to exist as a legal entity more than four years after being acquired by Bank of America Corp.

While Bank of America will keep the Merrill Lynch brand for its retail brokerage and investment bank, the Charlotte, North Carolina-based company plans to dissolve the subsidiary as early as the fourth quarter, according to an Aug. 2 filing. The firm will assume all of Merrill Lynch's obligations and debt.

If the restructuring does occur, it is not expected to impact Merrill's advisers, said company spokeswoman Susan McCabe.

“There is a lot of confusion out there on this,” she said in an email. “It has nothing to do with the Merrill Lynch brand.”

Merrill does business under its broker-dealer, Merrill Lynch Pierce Fenner & Smith Inc. “There is no change there,” Ms. McCabe said.

The parent of MLPFS, Merrill Lynch & Co., is the entity that might be merged into Bank America.

That Bank of America is considering folding Merrill Lynch & Co. into the bank was first disclosed in Merrill's first-quarter report last May. News that the change could happen as early as this year was added to the latest 10Q.

“It’s not a big deal if they don’t change the brand,” said a Merrill adviser based in California who asked not to be identified.

“It’s sort of sad,” added another Merrill rep on East Coast, who also couldn’t be named.

From a business standpoint, nothing looks like it will change, the East Coast rep said. But the end of Merrill Lynch as a separate legal entity “takes away from the historical significance of its founding 100 years ago,” he said.

Merrill will celebrate the 100th anniversary of its founding next January.

Reducing the number of subsidiaries could make it easier for Merrill reps, though, the California broker said. Advisers at the firm are technically dual employees of both the bank and BD, he said, which can complicate registrations.

Bank of America has already integrated much of its banking and brokerage infrastructure, he added.

“We can view clients’ bank accounts at Bank of America” and get paid on cash balances held at the bank, he said.

Bank of America, the second-biggest U.S. lender by assets, is simplifying its structure after chief executive Officer Brian T. Moynihan's predecessor bought Merrill Lynch in 2009. Merging the legal entity could help Moynihan hit his $8 billion-a-year cost-cutting target and comply with regulators who want to make the biggest banks easier to resolve in a crisis.

“Less-complex structures would increase the success of resolution planning via living wills in the case of potential worst-case financial distress scenarios,” David Hendler, an analyst at CreditSights Inc., said today in an e-mail with the subject line: “Bye Bye Merrill Lynch & Co.?”

Dissolving the legal entity also ends Merrill Lynch's need to file separate regulatory disclosures. Jerry Dubrowski, a spokesman for the bank, declined to comment on the change.

Bank of America faced regulatory probes, investor lawsuits and criticism from lawmakers over claims it didn't warn shareholders about Merrill Lynch's mounting losses before they voted to buy the firm for $18.5 billion.

Last year, Bank of America agreed to pay $2.43 billion to investors who suffered losses during the takeover, engineered by former CEO Kenneth D. Lewis as the world's biggest financial firms teetered near collapse during the 2008 credit crisis. Merrill's operations were credited with fortifying Bank of America in the years that followed as costs piled up from bad home loans and credit cards.

Merrill Lynch had about 14,000 financial advisers as of the second quarter, excluding those working at bank branches.

Bloomberg News contributed to this report.

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