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Archive for the ‘Merrill Lynch’ Category


FINRA fines Merrill Lynch $1.4 million for supervisory lapse

The Financial Industry Regulatory Authority (FINRA) announced that it has fined Merrill Lynch, Pierce, Fenner & Smith Incorporated $1.4 million for failing to establish a reasonable supervisory system and procedures to identify and evaluate extended settlement transactions, and for related rule violations.

Extended settlement transactions have a longer time between trade and settlement than routine securities transactions, and therefore involve an extension of credit and exposure to counterparty, credit and market risk. As a result of its supervisory deficiencies, Merrill failed to collect adequate margin to offset this risk, improperly extended credit to cash-account customers, and miscalculated its outstanding margin and net capital.

FINRA found that from at least April 2013 through June 2015, Merrill’s customers engaged in extended settlement transactions with notional values of hundreds of millions of dollars across numerous firm product lines. Despite the prevalence of these transactions, Merrill’s supervisory system, including written supervisory procedures, was not reasonably designed to identify and evaluate extended settlement transactions for compliance with margin and net capital rules. Consequently, Merrill’s computation of margin requirements and net capital deductions for tens of thousands of extended settlement transactions was inaccurate, resulting in margin rule and net capital violations, as well as inaccurate books and records and FOCUS Report filings.

FINRA also found that Merrill improperly extended hundreds of millions of dollars of margin credit in numerous retail customers’ cash accounts, in violation of Regulation T. These transactions should only have been permitted in margin accounts, not in customer cash accounts.

Merrill knew that its supervisory system was not reasonably designed to achieve compliance in connection with extended settlement transactions by April 2013. However, Merrill failed to implement any remedial measures until mid-2014. Moreover, Merrill failed to establish a firm-wide supervisory system and written procedures to address extended settlement transactions until mid-2015. FINRA found that Merrill’s failures to promptly address the deficiencies after it knew about them unreasonably delayed its compliance with applicable margin, net capital, and books and records rules, as well as Regulation T.

Citigroup, JP Morgan and others pay California $2.3 million in muni investigation

Citigroup Inc., JPMorgan Chase & Co. and 15 other underwriters reimbursed California $2.3 million last year after a regulatory probe found they used taxpayer funds to pay fees to their lobbyists.

Citigroup, the third-biggest U.S. bank by assets, returned $479,994, while Bank of America Merrill Lynch repaid a combined $456,482 and JPMorgan paid $490,449 for itself and Bear Stearns Cos., which it acquired, according to a spreadsheet California Treasurer Bill Lockyer’s office sent to the Financial Industry Regulatory Authority. The documents were obtained by Bloomberg News through a California Public Records Act request.

The repayments were about 50 percent more than Lockyer had estimated was owed a year ago, when the practice was uncovered in a Finra investigation of the California Public Securities Association, which lobbies state officials for the municipal- bond industry.

Merrill Lynch Sued For Madoff Losses

Just months before his now-infamous Ponzi scheme collapsed, Bernie Madoff snookered a Merrill Lynch adviser who was attempting to perform due diligence on him for a foundation that serves the elderly, according to a lawsuit filed in federal court in Florida last week.

In the complaint, MorseLife Foundation is seeking at least $33 million in damages from Merrill Lynch & Co. Inc., claiming that the New York financial advisory firm was taken in by Mr. Madoff during a face-to-face meeting just several months before his fraudulent investment empire collapsed.

Now in prison for running a $65 billion Ponzi scheme and wiping out the fortunes of a lengthy list investors, he met with the Merrill adviser, John S. Lacy, in July of 2008.

Mr. Lacy, a vice president with Merrill’s global wealth management group in West Palm Beach, along with foundation executives, was part of a group in a due diligence meeting on behalf of MorseLife, which filed the lawsuit last Friday in U.S. district court in Miami.

As of July 2008, the portfolio was worth $32.4 million.

After 2006, with the hope of building its relationship with the foundation, Merrill Lynch expanded its services, which included advising MorseLife on its investment policies, strategies, asset allocation risk tolerance and specific investments not managed by Merrill Lynch, the lawsuit claims. MorseLife in its suit is alleging that Merrill Lynch was negligent.

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