FINRA is ordering Bank of America’s (BAC) Merrill Lynch to pay a $1.9M fine for violating fair price guidelines over seven hundred times during a two-year period. The financial firm also must pay restitution of over $540K to customers that were affected.
According to the self-regulatory organization, Merrill’s credit trading desk purchased MLC notes from retail customers at up to 61.5% under the market price. General Motors had issued the notes prior to its bankruptcy. MLC Notes stands for Motors Liquidation Company Senior Notes.
Out of 716 transactions, 510 of them involved notes bought at markdowns that were greater than 10%. The desk would then sell the notes to brokers at market cost.
Issuing a statement, FINRA EVP and market regulation head Thomas Gira said that the SRO expects firms to abide by their duties to customers in regards to fair pricing. Gira said Merrill Lynch’s markdowns of the MLC Notes were not acceptable.
FINRA says the firm lacked a proper supervisory system that could identify this kind of violation. It is accusing the firm of failing to perform assessments of the credit desk after trades were made.
Merrill Lynch is settling without denying or admitting to the securities charges. It has, however, consented to an entry of the regulator’s findings.
As part of the agreement, over the next year and a half, Merrill Lynch will provide reports related to the credit desk’s supervisory system and its effectiveness. The firm says that it has since enhanced its supervisory efforts and taken disciplinary action.
Reliance Financial Advisors, Owners Face SEC Fraud Charges Involving Hedge Fund, Stockbroker Fraud Blog, December 15, 2015
Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 12, 2014
Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of this Website contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this Website. Read More.