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Former Merrill Brokers Settle SEC Charges

August 28, 1995

WASHINGTON (AP) _ Two former Merrill Lynch & Co. brokers agreed to settle Securities and Exchange Commission charges Monday involving record-keeping violations for Treasury and junk bond trades with a now-failed Florida insurance company.

Richard Allerton Jr., 50, was suspended from the securities industry for one year for his role in the bond trades with Guarantee Security Life Insurance Co. of Jacksonville, Fla. and its parent company, Transmark Corp. Florida regulators seized Guarantee Security Life in 1991.

Joseph G. Cote, 53, agreed not to violate securities laws in the future. Both men settled the SEC’s administrative charges without admitting or denying wrongdoing.

The case stems from the 1991 failure of Guarantee Security Life and a subsequent investigation of year-end junk bond trades the firm conducted with Merrill Lynch and its former brokers from 1984 through 1989.

Investigators initially explored allegations that Guarantee Security Life had engaged in ``phantom trades″ to help mask its financial problems.

However, the SEC’s case against the two ex-brokers narrowly focuses on improper record keeping of the trades and doesn’t allege the dealings led to the demise of Guarantee Security Life.

Merrill settled SEC record-keeping charges involving the case in December 1993, by accepting a public censure and by agreeing to improve record keeping. Merrill spokesman James Wiggins said the company neither admitted nor denied wrongdoing in the case, and that Merrill maintains ``the trades we did with Guarantee Security Life were legitimate.″

The SEC said Allerton ``was responsible for the failure of Merrill’s books and records″ to reflect the full terms and conditions of the bond trades with Guarantee Security. Allerton’s attorney, Charles Stillman, said his client was relieved the matter is resolved and that Allerton has been out of the securities business for three years.

Cote ``shared responsibility with Allerton″ to ensure that all aspects of the junk bond trades were properly recorded on Merrill’s books, the SEC said. A telephone call to Cote’s attorney wasn’t immediately returned.

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