WASHINGTON - Merrill Lynch & Co. sales and trading managers altered their research department's reports on the auction-rate securities market to minimize the risks of the securities and to forestall a collapse of the $330 billion ARS market, Massachusetts Secretary of the Commonwealth William Galvin argued in a lawsuit filed against the firm yesterday.

The complaint was filed by the securities division within Galvin's office on the same day that leaders of the House Financial Services Committee announced they would hold hearings to examine problems in the auction-rate market as well as changes that could be made to improve municipal disclosure and accounting standards.

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