FINRA Fines Merrill $150K for Allowing Unregistered Exec to Be Principal

The Financial Industry Regulatory Authority fined Merrill Lynch $150,000 and censured the firm for allowing an executive with its non-FINRA member affiliate function as a principal in its prime brokerage business without being registered with FINRA, according to the regulator.

Merrill Lynch declined to comment Thursday. However, without admitting or denying the findings, Joaquin Sena, deputy general counsel for the firm, signed a FINRA letter of acceptance, waiver and consent April 29 in which the company agreed to FINRA’s sanctions. The letter was accepted by FINRA Wednesday.

The Merrill executive wasn’t named in the AWC letter, which claimed the individual, from April 2016 through the present, was actively engaged in the management of Merrill Lynch’s prime brokerage business in the U.S. and exercised overall managerial decision-making authority.

That included: (1) hiring prime brokerage employees registered with FINRA; (2) directly supervising some of those employees; (3) writing performance reviews for registered employees; (4) determining and approving compensation for registered employees; (5) acting as a voting member of committees making business decisions for the firm’s securities business; (6) presiding over weekly U.S. prime brokerage sales meetings; (7) soliciting business from current and prospective clients; and (8) personally approving the onboarding of at least one customer, according to FINRA.

Merrill allowed the individual to act as a principal of the firm, but did not ensure the individual was registered with FINRA as a principal, FINRA alleged.

As a result, Merrill Lynch violated NASD Rule 1021 (which previously governed registration requirements) and FINRA Rule 1220 (which replaced it), as well as FINRA Rule 2010 (governing standards of commercial honor and principles of trade), according to FINRA.