Merrill Lynch discovered a trading "irregularity" during a recent investigation of the troubled investment bank's London trading positions, the company said on Friday.
The trading issue, which Merrill did not quantify, was the latest black eye for the bank, which agreed to be acquired by Bank of America last Sept. 15, the same morning that LehmanBrothers went bankrupt.
Merrill's net loss swelled to $15.84 billion in the fourth quarter amid big writedowns and investment losses on collateralized debt obligations and a variety of other risky securities.
Merrill said in a statement that it had informed regulators about the "irregularity" and was working with them to investigate.
"Senior managers of the business are focused on the issue and believe the risks surrounding possible losses are under control," Merrill said in a statement in London.
The UK Financial Services Authority refused to comment on the matter.
Earlier on Friday, The New York Times reported that Bank of America was probing whether Merrill delayed booking trading losses until hefty bonuses were approved and the buyout deal was sealed.