In late June, Merrill Lynch, Pierce, Fenner & Smith Inc. and Merrill Lynch Professional Clearing Corp. agreed to wrongdoing and a fine of $415 million to settle charges involving violations of Consumer Protection and Exchange Act rules.
At issue in the case was Merrill Lynch’s alleged violation of Exchange Act Rule 15c3-3, which requires broker-dealers to “maintain a reserve of funds and/or certain qualified securities in an account at a bank that is at least equal in value to the net cash owed to customers” and “promptly obtain and thereafter maintain physical possession or control over customers’ fully paid and excess margin securities…held free of liens or any other interest that could be exercised by a third-party to secure an obligation of the broker-dealer.”
The rule also requires self reporting in instances where broker-dealers like Merrill Lynch do not have adequate reserves.
Another issue in the case was a violation of Rule 21F-17, which is supposed to provide confidentiality to individuals within an organization who report potential wrongdoing to the SEC or other agencies. The SEC did not find that Merrill Lynch actively prevented its employees from directly communicating with the agency, but there was language in the company’s policies and procedures that did prohibit individuals from voluntarily disclosing confidential information.
While Merrill Lynch did admit to wrongdoing as part of the settlement, it did not admit to committing any type of fraud.
To learn more about this case and how it might impact your business or organization, meet with a skilled Dallas attorney at Whistleblower Law for Managers right away.