Merrill Lynch President Will Oversee Trading : Reshuffling Comes as Brokerage Reviews Operations After $250-Million Loss
Merrill Lynch President Daniel P. Tully will take temporary personal charge of all of the brokerage firm’s trading operations during a top-level review sparked by multimillion dollar losses, the company said Sunday.
A company statement said former Secretary of State William P. Rogers and Irving M. Pollack, former commissioner of the Securities and Exchange Commission, would advise management in an “intensive review” of trading operations.
The review comes follows the company’s announcement Wednesday that it had fired a senior trader who engaged in unauthorized trading that contributed heavily to a $250-million loss in mortgage-backed securities.
The firm, the largest U.S. stockbroker, said volatile markets--a sharp drop in bond prices in April--also contributed to the loss.
Merrill Lynch said Friday that, in an unrelated incident, another trader had been dismissed April 13 after a $10-million loss in trading Texaco bonds.
Before the organizational realignment announced Sunday, trading activities had been the responsibility of Jerome P. Kenney, president and chief executive of Merrill Lynch’s capital markets sector, and Brian M. Barefoot, senior vice president for broker-dealer activities.
Kenney will continue to be responsible for the company’s international, investment banking, corporate, municipal and institutional businesses, as well as its research and economics services. Barefoot will continue in his other duties outside the trading area and will report to Kenney.
“During this period of review we will place full responsibility for management of trading risk exposure at the highest level of our firm,” the Merrill Lynch statement said.
“This direct control will continue until we are satisfied the most appropriate trading management structure is in place and sufficient additional controls are established.”
Merrill Lynch executives said the executive reshuffle and high-level review were an effort by Chairman William A. Schreyer and Tully to swiftly take control of the situation. It was the first major crisis at the firm since Schreyer become chairman in April, 1985, replacing Roger Birk.
Tully told a meeting of the firm’s top salesmen in Naples, Fla., Sunday that the company regarded the situation as serious and that the shake-up was a signal it would not flinch from hard decisions.
Merrill Lynch has said it expects to be profitable in the second quarter of the year despite the trading losses.
