WASHINGTON -- Merrill Lynch & Co. has been held liable for losses resulting from Executive Life Insurance Co.-backed bonds it sold in 1988 and 1989 to an Illinois bank.

An arbitration panel of the Municipal Securities Rulemaking Board found that Merrill Lynch and one of its brokers, Robert Peele, were liable for $176,982 in losses suffered by the unnamed bank. The bank purchased bonds from four of nine taxable issues backed by Executive Life guaranteed investment contracts in 1986, and damages were awarded on two of the transactions.

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