Merrill Hit With $8.9M SEC Fine Over Conflicts of Interest

"Following those communications, and in a break from ordinary practices, the governance committee did not vote and chose to defer action on termination. The governance committee later lifted the hold and opened the third-party products to new Merrill accounts."

The SEC's order found that Merrill failed to disclose to its clients the conflicts of interest in Merrill's decision-making process.

"By failing to disclose its own business interests in deciding whether certain products should remain available to investment advisory clients, Merrill Lynch deprived its clients of unbiased financial advice," said Marc Berger, director of the SEC's New York Regional Office, in a statement. "Retail clients must feel confident that their advisors are eliminating or disclosing such conflicts and fulfilling their fiduciary duties."

Without admitting or denying the findings, Merrill consented to the SEC's order, which finds that the firm was negligent in violating the antifraud and policies and procedures provisions of the Investment Advisers Act of 1940.

Merrill said in a Tuesday statement that the broker-dealer "promptly enhanced our policies and procedures to ensure the confidentiality of recommendations in the future."

Merrill agreed to pay more than $4 million in disgorgement, $806,981 in prejudgment interest, and a more than $4 million penalty, and to be censured and to cease and desist from further violations.

— Check out At 34, and Top-Rated by Forbes, Merrill Advisor Forms His Own Wealth Firm on ThinkAdvisor.