Merrill Lynch fined for alleged supervisory failures that allowed reps to steal $6 million

On Behalf of | Dec 28, 2021 | FINRA Compliance

Merrill Lynch will have to pay a fine of $950,000 over allegations that lapses in supervision allowed two of its advisors to steal millions of dollars from clients, according to ThinkAdvisor.

The Financial Industry Regulatory Authority imposed the fine for violations that occurred between May 2013 and November 18. FINRA concluded that Merrill Lynch’s system was inadequate for supervising the transmission of customer funds via externally-initiated automated clearing house transfers.

Because of this failure, the firm did not detect the fact that two of its registered representatives had stolen over $6 million from 13 clients in separate schemes, FINRA’s report stated. The authority said Merrill had violated National Association of Securities Dealer Rules 3010 and 3012, and FINRA Rules 3110 and 2010.

According to a letter of Acceptance, Waiver and Consent published by FINRA last week, Merrill Lynch did not admit or deny the findings but did agree to a censure and the fine. The company also agreed to conduct a review of its policies and procedures for monitoring the transmission of customer funds, and to certify that its systems are designed to company with securities laws and FINRA rules.

In response to the FINRA report, Merrill Lynch said it has enhanced its monitoring system to detect inappropriate transactions, and has compensated clients who were affected by the schemes of the two former advisors. Both have been barred by FINRA.

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