By Lauren Pollock
Bank of America Corp.'s Merrill Lynch division agreed to pay
nearly $11 million and admit wrongdoing to settle charges it used
inaccurate data in executing short sale orders.
The U.S. Securities and Exchange Commission said some securities
that Merrill Lynch placed on its easy-to-borrow list for short
sales became no longer easily available, and the company's
execution platforms were programmed to continue processing short
sale orders based on the list.
Such lists are put together by Merrill and other broker-dealers
for customers to "locate" stock for short selling and are comprised
of stocks they have deemed readily accessible.
It wasn't until the platforms received the next day's list that
they returned to using accurate data, the SEC said. After the
agency started investigating, Merrill began implementing systems
enhancements to correct the problem, it said. The issues occurred
until 2012.
"When firm personnel determine that a security should no longer
be considered easy to borrow, the firm's systems need to
incorporate that knowledge immediately," said Andrew M. Calamari,
director of the SEC's New York regional office.
The bank also agreed to retain an independent compliance
consultant as part of the settlement.
Merrill Lynch agreed to pay a $9 million penalty, $1.57 million
in disgorgement and nearly $335,000 in prejudgment interest.
A representative from Merrill wasn't immediately available to
comment.
Write to Lauren Pollock at lauren.pollock@wsj.com
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