Merrill probed for ‘frontrunning’

The SEC investigation is in "advanced" stages, according to The Wall Street Journal.

The Securities and Exchange Commission is investigating whether several current and former employees of Merrill Lynch & Co. Inc. made improper trades for the brokerage’s own account ahead of client orders, according to a report in The Wall Street Journal.
The report, which cited people familiar with the matter, said the SEC would investigate whether some employees improperly stepped in front of orders placed by Boston-based Fidelity Investments to gain an unfair advantage between 2002 and 2005.
In “front-running,” employees take advantage of big stock moves that follow large orders from large investment houses.
It gives an unfair advantage to traders because orders from big investment houses such as Fidelity often move stock prices.
The investigation into Merrill’s house trading is in “advanced” stages, although it is not clear whether the SEC will file a civil lawsuit, the report stated.
The SEC is already investigating how the firm valued securities tied to home mortgages as well as the timeliness of those disclosures, according to the report.