Merrill Lynch has been penalized over allegations it failed to report more than 1,600 customer complaints submitted through post-call surveys, according to a ThinkAdvisor report.
According to a settlement with the Financial Industry Regulatory Authority, Merrill Lynch was fined $225,000 and censured for violations of FINRA Rules 4530(d), 3110(a) and (b), and 2010..
“From January 2018 through December 2023, Merrill Lynch invited customers who phoned its call centers to complete a post-call survey, which included a written commentary section,” FINRA stated. “However, the firm did not reasonably review the written responses to identify customer complaints and failed to reasonably supervise to achieve compliance with its quarterly summary and statistical customer complaint reporting obligations under FINRA Rule 4530( d). As a result, Merrill Lynch did not report thousands of customer complaints in the survey responses to FINRA.”
FINRA Rule 4530 requires member firms to report to FINRA certain customer complaints. FINRA Rule 4530( d) requires member firms to report on a quarterly basis statistical and summary information regarding written customer complaints.
FINRA Rule 4530 Supplementary Material .08 (Rule 4530.08) requires that member firms report any written grievance by a customer involving the member or any person associated with the member. FINRA uses the information received pursuant to Rule 4530 for regulatory purposes, including to identify and initiate investigations of member firms, associated persons, and others that may pose a risk to investors.
FINRA noted that in 2023, Merrill received over 220,00 responses to its survey including a free-form comment section. The firm identified and reported around 2,400 complaints during that year but missed the 1,600 others as a result of an improperly programmed supervisory system, according to the settlement.
The majority of the unreported complaints concerned service-related issues. “Some complaints also included issues such as inability to access funds; difficulties obtaining account information and documentation; technical problems with the firm’s online system; and security incidents,” according to FINRA.
The authority said that Merrill’s review process relied on a lexicon of search terms and criteria, but it had been developed for consumer banking products and was not reasonably designed to identify all reportable complaints for broker-dealer customers.
Merrill Lynch agreed to the settlement without admitting or denying the findings. A Merrill spokesperson declined to comment.
In determining the sanctions, FINRA said it credited Merrill for self-reporting the issue, conducting a review of survey responses from 2023, resolving complaints identified during that review and subsequently reporting those complaints to the regulator. Merrill suspended the written comment section of its post-call surveys in January 2024 after identifying the issue.
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