Merrill to Add Fee for Short-Term Fund Trades

Merrill Lynch & Co., the world’s biggest securities firm by capital, plans to add a 2% redemption fee to 23 of its mutual funds to thwart short-term trading, a practice that’s at the center of the scandal roiling the industry.

Merrill Lynch, which oversaw $500 billion at the end of last year, will charge the extra fee on sales of “certain” mutual funds held less than 30 days, according to a memo that the New York-based company sent to its employees. The new policy, “in response to the continuing, industrywide mutual fund trading issues,” takes effect June 30.

State and federal regulators are investigating more than 20 firms in the $7.5-trillion industry for alleged illegal trading that may have violated fund prospectuses and lowered returns for most shareholders. Merrill Lynch hasn’t been accused of any wrongdoing.