A federal judge has dismissed a lawsuit by investors in auction-rate securities against Merrill Lynch & Co. for allegedly manipulating the ARS market.

U.S. District Judge Loretta A. Preska in Manhattan threw out the complaint, saying in part that the investors had failed to adequately demonstrate manipulative conduct by Merrill.

"The plaintiffs' allegations that Merrill Lynch held conference calls with financial advisers and provided them with incentives to sell ARS support the reasonable inference that the financial advisers did actually focus on selling ARS to investors," the judge's order last week said. "Absent other facts, however, these allegations do not support a reasonable inference that the financial advisers did so by making false or misleading statements."

The lawsuit was one of nine cases against the Bank of America Corp. unit that have been consolidated for pretrial proceedings.

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