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Financial Planning > Behavioral Finance

Merrill Fined $2.5M Over Unapproved ‘Double Production’ Talks

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Massachusetts regulators required Merrill Lynch (BAC) to pay a $2.5 million fine after the brokerage firm failed to supervise internal presentations made during meetings of over 300 financial advisors and other staff in Boston.

The talks, which were not pre-approved by compliance staff, focused on Optimal Practice Model (OPM) Tools and took place in early 2013. In addition to advisors, Merrill Lynch executives, directors and senior vice presidents were present.

The Secretary of the Commonwealth’s order states that the presentations included information on how to “(d)ouble (p)roduction” ‘by’… “among other things, transfer of existing customer assets from commission-based brokerage accounts, to fiduciary fee based alternatives.”

The regulators add that the presentation “did not include language regarding client suitability or the fiduciary requirements of Merrill Lynch financial advisors.”

The state regulators, thus, stepped in to address the associated risks.

“Merrill may have on the books stringent rules on adhering to regulatory duties and obligations but by not discussing them explicitly in this presentation on ‘doubling production,’ Merrill created a risk the attendees could have been misinterpreted the double production presentation included in the OPM Tools Presentations,” said Secretary of the Commonwealth William Galvin, in a press release

“Foremost among these risks,” Galvin declared, “is that the financial advisers may have been encouraged to move their clients’ assets based on their own financial interest rather than their clients’ best interest.”

For its part, Merrill Lynch said it is “reiterating to our employees the need to have internal presentations properly approved before their use,” according to a statement. “Importantly, as the state notes, this was not a matter involving any conduct that disadvantaged our clients.”

As of Dec. 30, the number of BofA-Merrill advisors was 14,085, excluding FAs in consumer and business banking and with Merrill Edge.

Productivity of the Merrill Lynch reps, as measured by average yearly fees and commissions, was roughly $1.07 million in the fourth quarter, down slightly from $1.08 million in Q3 but up from $1.04 million in Q4’13.

At rival UBS-Americas, average productsion per advisor stood at $1.09 million in Q4’14.


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