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UPS Investors Deliver Merrill Lynch A Regulatory Punch

This article appears courtesy of Institutional Investor


Retirees of United Parcel Service have charged a Merrill Lynch broker with taking their stock they held in their company and putting it in a risky investment that caused them to lose millions of dollars in some cases.

In a hearing before an NASD arbitration panel, the retirees charged that the broker, Brian Wurdemann, represented the move of UPS stock into an options trading strategy as having "no downside." In fact, retiree Arthur Weyrauch, charges he lost about $3.2 million because of the so-called "covered call writing" strategy.

According to The New York Post, the problems arose when the stock price rose instead of falling or remaining flat. At that point, the option seller has to deliver the stock underlying the option at a price lower than what it is trading for at the time.

Merrill Lynch insists, says the Post, that the retirees were fully aware of the risks, but Seth Lipner, the attorney representing Weyrauch told the paper that "UPS people are religious about the company and its stock. They never sell it, and the recommendation to invest "with Wurdemann was "a serious endorsement."

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