Schainker Division of Securities

In the Matter of: Edward Louis Schainker

No. 0900049, State of Illinois Secretary of State Securities Department

Edward Schainker was IFDA's investment advisor at Merill Lynch, and recommended the investments that left the Trust in its current deficient state. Shortly after this lawsuit was filed and Mr. Schainker's role in this fiasco was disclosed, the Division of Securities, acting under the authority of the Secretary of State of Illinois brought formal proceedings against defendant Edward Schainker of Merrill Lynch, Pierce, Fenner & Smith, Inc.

The Secretary of State at that time deemed it "necessary, in order to prevent imminent and additional violations of the [Illinois Securities Law of 1953] Act, and to prevent losses to investors..." to temporarily suspend Mr. Schainker's investment adviser representative and salesperson registrations. For a copy of the Temporary Order of Suspension issued against Mr. Schainker, click here.

Since that time, the Division of Securities has moved to permanently prevent Mr. Schainker from acting as an investment adviser in Illinois. Among the charges against him are that:

During the time period that he advised and managed the Trust, [Schainker] committed or participated in violations of the Illinois Insurance Code, the Illinois Burial Funds Act and the Illinois Securities Act through fraudulent statements and deceptive practices. Additionally, his advice and management of the Trust was not in the best interests of the Trusts and resulted in placing over $200 million of Trust assets in illiquid insurance contracts and the Trust's incurring significant losses that continue to grow. During this time period, both Schainker and his employer, Merrill Lynch and its affiliates received millions of dollars of commissions and other compensation payments for transactions he recommended and effected for the Trusts and his management of the Trust.

For a copy of the charging document, click here. The next hearing on this matter is scheduled for September 1, 2009 in Springfield, Illinois. This is a public proceeding, so the public may attend and observe. The temporary suspension order will remain in effect until this time.