Secretary of State William F. Galvin fined Merrill Lynch & Co. $250,000 in connection with the sale of more than $39 million in auction-rate securities to two Massachusetts banks.

The securities, sold by the Boston branch of the brokerage firm, were a popular type of fixed-income investment that was considered low-risk until the market froze in early 2008, and the auctions for the investments failed. That left thousands of customers, large and small, unable to sell the securities for months, and in some cases years.

Galvin said auction-rate securities could be sold only to “qualified” institutional buyers, with at least $100 million in investments. Merrill Lynch did not follow proper procedures for determining if the banks were qualified, and they were not, he said.

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Merrill Lynch spokesman Bill Halldin said, “We’re pleased to resolve this matter.”

The Wall Street brokerage, now owned by Bank of America Corp., had previously reached separate settlements with the banks.