The Financial Industry Regulatory Authority has fined Merrill Lynch $950,000 for allegedly failing to detect that two of its registered representatives stole more than $6 million from 13 clients of the firm in separate schemes over the course of multiple years.
From May 2013 through November 2018, Merrill "failed to reasonably supervise the transmittal of customer funds via externally initiated" automated clearing house transfers, according to the broker-dealer self-regulator.
As a result, Merrill violated NASD Rules 3010 and 3012 (both no longer applicable) and FINRA Rules 3110 (governing supervisory rules) and 2010 (governing standards of commercial honor and principles of trade), according to FINRA.
Responding to a request for comment on Tuesday, Merrill spokesman William Halldin told ThinkAdvisor: "As the settlement notes, several years ago we developed an enhanced monitoring system to detect possible inappropriate transactions. Clients impacted by the conduct of these two former Financial Advisors have been compensated."
The issue originated after Merrill notified FINRA on Jan. 25, 2018, that the firm terminated a registered rep for theft and other misconduct. On Jan. 26, 2018, Merrill filed a Form U5 reporting the registered representative was terminated on Jan. 8, 2018, for conduct that included "unauthorized transactions and theft," according to FINRA.
In addition to the fine, Merrill agreed to be censured and that, within no later than 90 days of the date of issuance of the AWC, a senior officer and principal of Merrill will certify in writing that Merrill has completed a review of its policies, procedures and systems regarding the monitoring of transmittals of customer funds, according to FINRA.
The Merrill executives must also certify in writing that its policies, procedures and systems are "reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules," according to FINRA.
