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DJ Merrill Lynch Ordered to Pay $3.6 Million to Brazilian Heiress

NEW YORK--An arbitration panel has ruled that Merrill Lynch must pay $3.6
million to a wealthy Brazilian heiress for losses she said resulted from her
brother's unauthorized trading in her account.

The case, in the name of Sophin Investments SA, was just one facet of a
wide-ranging dispute--playing out in the courts and in arbitration--between
members of Brazil's Nasser banking family and Merrill Lynch over trading losses.

Sophin Investments was set up to handle an inheritance that Camelia Nasser de
Kassin received from an uncle, banker Edmond Safra, according to her attorney,
Barry R. Fischer. In its claim, Sophin accused Merrill Lynch of allowing Mrs.
Kassin's brother, Ezequiel Nasser, to conduct $389 million in unauthorized
trades in a retail brokerage account it had at Merrill Lynch Pierce Fenner &
Smith Inc., Mr. Fischer said.

Mr. Nasser invested heavily in naked puts in Bear Stearns and Lehman Brothers,
among other financial stocks, Mr. Fischer said. When the financial crisis hit in
2008, the account ended up between $8 million and $9 million in the red, he

Mr. Nasser also conducted unauthorized trades in a swap account Sophin held at
Merrill Lynch Capital Services Inc., Mr. Fischer said. In March, 2008, that
account held a balance $6.1 million, which Mr. Fischer said Merrill took to
offset the underwater retail account. The retail account still was left with a
deficit of $2.4 million, he noted.

Sophin accused Merrill of failure to supervise its staff, unsuitable investing
and fraud, among other claims, and requested $21 million in compensatory
damages, according to documents from the Financial Industry Regulatory Authority
arbitration panel. That figure includes the original $9.5 million deposited in
the accounts, a $9.5 million return on the investments and Merrill's
commissions, Mr. Fischer said.

Merrill launched a counterclaim against Sophin, alleging breach of contract.
It requested the panel award it nearly $2.5 million in damages to cover the
deficit in Sophin's retail account and nearly $3 million related to the swap
account. It also launched claims against Marc Bonnant, the attorney who set up
the accounts for Sophin, and Mr. Nasser. Mr. Bonnant was the only person who
could legally make investment decisions for Sophin, Mr. Fischer said.

Merrill Lynch declined to comment on the case.

In its decision Tuesday, the Finra arbitration panel found both Merrill and
Sophin liable. It ordered Merrill to pay Sophin $6.1 million in compensatory
damages but also ruled that Sophin owed Merrill $2.5 million.

Mr. Fischer expressed disappointment in the ruling. "The amount awarded
doesn't nearly reach the magnitude of the loss we think Merrill Lynch caused,"
he said.

The panel said that, based upon his testimony, Mr. Bonnant's attention to his
fiduciary duties to Sophin "was less than adequate." But Merrill displayed
"lapses in record keeping and supervisory procedures," according to the panel's
documents. "There was no evidence, however, that these deficiencies were either
widespread throughout [Merrill's] organization, meriting further action, or
material to the claims before the panel," it said.

The panel denied Merrill's claims against Mr. Nasser but in accordance with a
court decision, said it doesn't have jurisdiction over Mr. Bonnant. It,
therefore, didn't rule on Merrill's claim against the attorney.

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