Agile Software Corp. v. Merrill Lynch & Co., Inc.

ORDER DISMISSING CASE

INTRODUCTION

This action presents an issue of first impression, namely who bears the costs of providing shareholder materials for securities held in a so-called HOLDRS trust. This order holds that the issuer bears those costs under properly-promulgated regulations of the Securities and Exchange Commission. This order DISMISSES plaintiffs’ complaint as to the federal claim and declines to exercise supplemental jurisdiction over the state-law claims.

STATEMENT

Defendant Merrill Lynch, Pierce, Fen-ner & Smith, Inc., began offering a product called HOLDRS (holding company depository receipts) in 1999. Merrill Lynch created HOLDRS by selecting several companies within an industry or a sector, buying their stock, and then placing the stock in a trust held by defendant Bank of New York. HOLDRS were receipts to the trust, representing each purchaser’s interest in the underlying shares. Investors could'trade HOLDRS as securities on defendant American Stock Exchange (“AMEX”).

Approval from the SEC was necessary-before HOLDRS could be sold. On May 28, 1999, AMEX filed a rule change with the SEC, seeking permission to amend AMEX Rules 1200 through 1202 to allow…