Close Close

Regulation and Compliance > Federal Regulation > SEC

Merrill Pays $42M for Misleading Broker Clients

Your article was successfully shared with the contacts you provided.

Bank of America Corp.’s Merrill Lynch unit agreed to pay a $42 million penalty to settle a U.S. regulator’s allegations that it routed millions of customer orders to outside brokers, while telling them it had executed the transactions internally.

From 2008 to 2013, Merrill hid that the fact that client requests to buy and sell stock were being handled by proprietary trading firms and other outside entities, the Securities and Exchange Commission said in a Tuesday order.

Merrill did so after some customers specifically requested that their orders not be executed externally because they were concerned about “information leakage,” the SEC said.

“By misleading customers about where their trades were executed, Merrill Lynch deprived them of the ability to make informed decisions regarding their orders and broker-dealer relationships,” said Stephanie Avakian, co-director of the SEC’s enforcement division. “Merrill Lynch, which admitted that it took steps to ensure that customers did not learn about this misconduct, fell far short of the standards expected of broker-dealers in our markets.”

During the five-year period, Merrill executed more than 15.8 million orders externally with a notional value of more than $141 billion, the SEC said.

The firm “falsely reported to customers that all of these transactions occurred at Merrill Lynch,” according to the regulator.

In settling the case, Merrill admitted wrongdoing, the SEC said.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.