The move by the US Securities and Exchange Commission (SEC) is part of a broad-ranging probe by the regulator of possible conflicts-of-interest involving public pension funds.
“It is common knowledge that the SEC has been conducting an industrywide examination of possible conflicts of interest in the pension-consulting business,” said Merrill spokesman Mark Herr, who neither confirmed nor denied the subpoena to Dow Jones. “As Merrill Lynch always does in regulatory matters, it has cooperated with the SEC as this has unfolded. The firm has no reason to believe its circumstances or those of any of its employees are unique.”
In May, the SEC released a study on potential conflicts in the pension-fund consulting industry, and said it was referring several cases to its enforcement division. It didn’t name firms or individuals (See SEC Calls for Pension Consultant Disclosure Reforms ).
At issue are consultants who may have recommended that public pension-fund clients use money managers that made kickbacks to the consultants. Some of the payments may have been made through stock- and bond-trading commissions and fees paid to affiliates of the consultants.
People familiar with the Merrill probe said Michael Callaway, a Merrill consultant whose clients include the $2 billion Jacksonville Police and Fire Fund in Florida, has also received a subpoena along with some ex-Merrill employees.
The SEC study found that a majority of pension-fund consultants it examined have affiliated broker-dealers or relationships with unaffiliated broker-dealers.