Regulator Slaps Merrill Lynch With $7 Million Penalty
November 30 2016 - 1:23PM
Dow Jones News
By Joshua Jamerson
The Financial Industry Regulatory Authority said it fined
Merrill Lynch $7 million for inadequately supervising its
customers' use of leverage in Merrill brokerage accounts.
The penalty for Merrill, a unit of Bank of America Corp.,
consists of $6.25 million in fines plus $780,000 in
restitution.
Merrill's loan management accounts, or LMAs, are lines of credit
that allow customers to borrow money from an affiliated bank using
securities held in the brokerage accounts as collateral. Finra, in
a press release Wednesday, said Merrill "lacked adequate
supervisory systems and procedures regarding its customers' use of
proceeds from these LMAs" from January 2010 through November
2014.
Finra, which regulates securities firms in the U.S., said
Wednesday it separately found that from January 2010 through July
2013, Merrill lacked systems and procedures to ensure the
suitability of transactions in certain Puerto Rican securities such
as municipal bonds and closed-end funds. Holdings in such
securities were highly leveraged through either LMAs or margin,
Finra said. Merrill has already reimbursed some customers and, as
part of the settlement, will pay about $780,000 in restitution to
22 remaining customers.
Merrill, which in agreeing to the payment neither admitted nor
denied the charges, said the firm cooperated fully with the
regulator's inquiry and has since strengthened its internal
controls and procedures.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
November 30, 2016 13:08 ET (18:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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