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Merrill Lynch Denies Australian Insider Trading Allegation
Venerable investment bank Merrill Lynch, now a unit of Bank of America has denied accusations that it was involved in what could be the largest case of insider trading in Australian corporate history.
Over the weekend The Age reported that David Waterhouse a member of a Sydney horse racing family alleged that executives at Merrill Lynch were aware that the bank would make a materially adverse statement in New York on January 18th and used the information as the basis for short selling $55 million worth of blue chip Australian equities.
The investment bank issued a statement on Monday rejecting the allegations saying,
“Merrill Lynch completely rejects the allegations of insider trading which have been the subject of recent press coverage. Merrill Lynch has already commenced proceedings to recover in excess of $9 million owed to it by How Trading and David Waterhouse. These proceedings are set down for trial next Tuesday.”
The Age, in its report quoted a source at the Australian securities regulator ASIC as saying that the allegations Mr. Waterhouse has made against the investment bank were on the agenda of the weekly board meeting of the regulator held on Monday. Neither the ASX nor ASIC would make an official statement.
The allegations Mr. Waterhouse made against Merrill Lynch occurred in a witness statement given to the Victorian Supreme Court. The statement according to The Age says that an executive at the investment made a direct comment to Mr. Waterhouse about the imminent adverse news from New York.
Four days after that meeting at the Merrill Lynch office in Sydney, the company announced a $US9.83 billion fourth-quarter loss in New York, including a $US16.7 billion write-down associated with subprime mortgage losses. Equity markets and banking stocks around the world tumbled on the news.
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