New York Attorney General Eric Schneiderman said Friday that Bank of America Merrill Lynch will pay a $42 million penalty to settle an investigation of fraudulent practices tied to its electronic-trading services for institutional clients.
As part of the settlement, BofA Merrill admitted that from 2008 to 2013 it did not tell clients it was routing 16 million equity orders to so-called electronic liquidity providers (or ELPs), such as Citadel Securities, Knight Capital, D.E. Shaw, Two Sigma Securities and Madoff Securities.
The investigation also found the bank made other misleading statements that made the undisclosed services “appear safer and more sophisticated than they really were,” according to the attorney general.
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“Bank of America Merrill Lynch went to astonishing lengths to defraud its own institutional clients about who was seeing and filling their orders, who was trading in its dark pool, and the capabilities of its electronic trading services,” Schneider explained in a statement.
“As Wall Street firms offer increasingly complex electronic trading services, they cannot use new technology to exploit their clients in service of their business relationships with large industry players, like Bank of America Merrill Lynch did here,” he added.