Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
April 2010
Merrill Lynch, Pierce, Fenner & Smith Incorporated
AWC/2008012391401/April 2010

Through several of its employees at the branch office level and employees of an affiliate in the Office of General Counsel, the Firm made material misstatements to NYSE Regulation examiners relating to an on-site branch office examination relating to non-registered cold callers by

  • providing the NYSE with inaccurate and deceptive information in response to various regulatory examination requests,
  • instructing staff that an unapproved facsimile machine be hidden or removed, and
  • by providing an inaccurate written statement in response to requests for information during an ongoing investigation.

Unlicensed Attorney

The Firm failed to properly supervise a registered person with the firm who held himself out as an attorney on firm stationery and business cards even though he was not licensed or admitted to practice before any state or federal bar.

Away Accounts

The Firm failed to

  • provide letters from outside broker dealers, whose employees maintained accounts at the firm, confirming that they were aware of such accounts;
  • receive and review duplicate confirmations and monthly account statements for accounts that employees maintained outside the firm;
  • evidence the approval of such accounts; and
  • send duplicate statement and confirmations to other firms whose employees had accounts at the firm.

Communications and Computers

The Firm failed to

  • evidence review and supervision of incoming or outgoing written communications and facsimiles at certain branches;
  • evidence the approval for certain employees to maintain computers and software; and
  • review, supervise and/or evidence supervisory review of communications that employees sent and received with non-firm issued computers.

The Firm failed to place certain accounts on 90-day restrictions; evidence the review, approval and/or supervision of order errors and account designation changes; and date or properly date corrections for order errors and account designation changes. Also, the Firm failed to evidence the review, approval and/or supervision of certain personal computer forms that had been backdated at a branch; failed to approve and/or timely approve seminars that firm employees conducted, and maintain certain seminar-related materials; failed to review, approve and/or retain certain facsimiles, including Fax-2-Mail correspondence and/or evidence its review and approval; and failed to maintain its "control" fax machine in a secure location in one branch.

Merrill Lynch, Pierce, Fenner & Smith Incorporated : Censured; Fined $300,000
Tags:  Fax    Away Accounts    Communications    Computers    Correspondence     |    In: Cases of Note : FINRA
Bill Singer's Comment

I mean, wow!  The breadth of these allegations is simply stunning.  First, I'm still trying to digest that nugget about Merrill's Office of General Counsel -- FINRA's allegations are amazing: inaccurate and deceptive responses, and instructing staff to hide/remove an unapproved FAX machine.

Then there are the whole host of compliance policies and procedures that just seem to have been overlooked.  You know, those types of policies and procedures that if, say, a smaller firm than the once mighty Merrill Lynch disregarded, well, you know, we would expect to see names and suspensions and massive fines.

You gotta love how FINRA deals with the financial superstores -- or should I say the once-and-mighty?  I wonder what percentage of Merrill's annual revenues $300,000 represents?  Maybe I could cut a similar deal for one of my indie/regional brokerage firm clients?  Hey, I almost forgot, isn't it just wonderful how no human being is referenced or named in this case.  Remind me to ask for the concession in the future too.

Enforcement Actions