SEC Charges Merrill Lynch Failure to Supervise
According to a press announcement on Monday, the Securities and Exchange Commission announced that Merrill Lynch, Pierce, Fenner & Smith Inc. will pay more than $15 million to settle charges that its employees allegedly misled customers into overpaying for Residential Mortgage Backed Securities (RMBS).
Merrill Lynch reportedly agreed to repay more than $10.5 million to its customers and to pay penalties of approximately $5.2 million.
According to the SEC’s order, Merrill Lynch traders and salespersons allegedly convinced the bank’s customers to overpay for RMBS by deceiving them about the price Merrill Lynch paid to acquire the securities.
The order also found that the firm’s RMBS traders and salespersons allegedly profited from excessive, undisclosed commissions (“mark-ups”) which in some cases were more than twice the amount the customers should have paid.
Failure to Supervise
According to the SEC’s order, Merrill Lynch failed to have compliance and surveillance procedures in place that were reasonably designed to prevent and detect the misconduct that increased the firm’s profits on RMBS transactions to the detriment of its customers.
The firm’s traders and salespersons purportedly violated antifraud provisions of the federal securities laws in purchasing and selling RMBS and that Merrill Lynch failed to reasonably supervise them, according to the SEC.
Without admitting or denying the findings, Merrill Lynch agreed to be censured, pay a penalty of approximately $5.2 million, and pay disgorgement and interest of more than $10.5 million to Merrill Lynch customers that were parties to the transactions that are the subject of the order.
Brokerage firms have a legal responsibility to adequately supervise the business activities of their employees. If a broker engages in a scheme that misleads clients the brokerage firm that employs them may be liable for negligent supervision.
When brokers abuse client accounts and conduct transactions that violate securities laws, the brokerage firm they are working with may be liable for investment losses. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
If you suffered losses investing withMerrill Lynch Pierce Fenner & Smith or Berthel Fisher, the attorneys of The White Law Group may be able to help you recover your losses. For a free consultation with a securities attorney, please call 888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
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