Merrill Lynch has been fined by the Financial Industry Regulatory Authority following allegations of improprieties involving short sales, according to ThinkAdvisor.
The firm reached a settlement with FINRA that was detailed in the authority’s letter of Acceptance, Waiver and Consent signed last month. As part of the AWC Merrill Lynch consented to a fine of $850,000 and a censure, but did not admit or deny the findings.
Among the issues cited by FINRA was that Merrill Lynch violated Rule 204 of Regulation SHO and FINRA Rule 2010. This was done, the authority said, by improperly netting the trading activity of five affiliated broker-dealer customers when determining their close-out obligations and claiming pre-fail credit. FINRA said the firm misapplied the guidance of the Securities and Commission in using a “multi-day approach” to aggregating net purchases done across multiple days leading up to the applicable close-out date.
FINRA also determined that Merrill had included the securities positions of their foreign and nonbroker-dealer affiliates when calculating the net positions of two independent trading units. That action was in violation of Rule 200(f) of Regulation SHO.
In addition, Merrill was found to have failed to establish a supervisory system designed to achieve compliance with Rule 200(f) of Regulation SHO, in violation of NASD rules 3010 and 2110, and FINRA Rules 3110 and 2010.2.
Also last week, Merrill Lynch was hit with a $1.5 million fine by FINRA for alleged violations of Municipal Securities Rulemaking Board rules requiring a supervisory system to monitor short positions in municipal securities.
At Lewitas and Hyman, we understand the complexities that come with being the subject of a regulatory inquiry by the SEC, state regulators and other self-regulatory organizations such as FINRA and other exchanges. If you are the subject of a regulatory proceeding, contact us at (888) 655 6002 or through our online contact form for a free consultation.
