Merrill Lynch has reached a $13.5 million joint settlement with state regulators and the New York Stock Exchange over charges that it failed to supervise a group of financial advisers who engaged in abusive market timing of the firm's mutual funds.

Under the terms of the agreement, Merrill will pay a $10 million civil penalty imposed by the NYSE to the state of New Jersey. In addition, the company will implement new compliance procedures to maintain records of all client reallocation requests made through a Merrill employee related to funds held as sub-accounts of variable annuities from outside insurers.

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