Trust Fund's Suit Accuses Merrill Lynch of Failing to Disclose Markup on Zeros

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WASHINGTON -- A Detroit trust fund has sued Merrill Lynch, Pierce, Fenner & Smith Inc., accusing it of charging "undisclosed, excessive markups" on its zero coupon bonds based on stripped Treasury securities.

The plantiff is asking its lawsuit be designated a class action.

The case may bring to the surface a host of legal questions that have surrounded the stripped government securities since they became popular three years ago.

Merrill Lynch's zeros, officially known as Treasury Investment Growth Receipts, or TIGRs, represent "claims on the future principal and interest" of Treasury instruments held by a custodian bank, according to sales literature …