Merrill Lynch & Co may have misled investors about the risk profile of the CDO assets on its balance sheet.

This is a broad ranging securities class action lawsuit against Merrill Lynch & Co and certain third parties and officers and directors.

This consolidated action encompasses security fraud allegations, shareholder derivative actions and ERISA actions. This consolidated class action alleges that Merrill issued materially false and misleading statements regarding its business and financial results over a period of 8 months prior to October 2007, creating an artificially high stock price. In early October 2007, Merrill acknowledged it would have to take a $5 billion third quarter 2007 charge for mortgage and credit problems, the complaint said. "Then on Oct. 24, 2007 ... Merrill issued a press release which announced the third quarter charge would be $8 billion instead of $5 billion."

The class action complaint alleges that, during the Class Period, Merrill issued materially false and misleading statements regarding Merrill's business and financial results. Merrill had gone heavily into Collateralized Debt Obligations ("CDOs") which generated higher yields in the short term but which would be devastating to Merrill as the real estate market continued to soften and the risky loans led to losses. According to the complaint, Defendants knew or recklessly disregarded that:

(i) Merrill was more exposed to CDOs containing subprime debt than it disclosed; and

(ii) Merrill's Class Period statements were materially false due to their failure to inform the market of the ticking time bomb in Merrill's CDO portfolio due to the deteriorating subprime mortgage market, which caused Merrill's portfolio to be impaired.

In early October 2007, Merrill acknowledged it would have to take a $5 billion third quarter 2007 charge for mortgage and credit problems. Then, on October 24, 2007, before the market opened, Merrill issued a press release which announced the third quarter charge would be $8 billion instead of $5 billion. On this news, Merrill's stock dropped from $67.12 per share to as low as $61.40 per share, closing at $63.22 per share on volume of 52 million shares. Subsequently, on October 25, 2007, S&P reduced Merrill's credit rating to negative after the brokerage reported the biggest quarterly loss in its 93-year history, causing Merrill's stock to dramatically drop to $60.90 per share.