Securities: Now You See ‘Em . . .

Did Merrill Lynch help disguise a failing insurance company to look healthy? The Securities and Exchange Commission is investigating whether the firm made deals designed to dress up the books of Guarantee Security Life Insurance, a Jacksonville-based company that Florida regulators seized last August after it succumbed to losses on high-risk investments. Investigators say the company traded its junk bonds for as much as $300 million in government securities in short-term swaps with Merrill in 1985, ’86 and ’88. The temporary deals allowed Guarantee Security to portray itself as financially healthy to state regulators during year-end audits. But secret trades to hide ownership of securities may constitute “parking,” a violation of securities laws. “Merrill Lynch strongly denies that it engaged in any illegal or unethical activity,” a company statement said.