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Merrill Fined $650,000 Over Customer Trades

May 19, 2017

Merrill Lynch is on the hook for $650,000 to Finra over alleged failures to get its customers the best price on thousands of trades, as well as for failures in supervision and record-keeping, the industry’s self-funded watchdog says in a disciplinary action document.

The settlement involves Merrill’s Global Banking & Markets Credit Trading Desk and how it handled customer orders in non-convertible preferred securities from July 1, 2010 through the end of 2012, and how the wirehouse’s Global Wealth and Retirement Solutions Block Trading Desk handled customer orders in over-the-counter convertible preferred securities from the start of 2011 through September 2014, according to Finra.

In the first case, customers were allegedly overcharged a markup of up to 12 cents a share on more than 1,500 trades, while trade reports for the transactions in question frequently failed to reflect accurate execution times, according to the document. In addition, customer trade confirmations in more than 12,000 instances differed from reports sent to the Finra/Nasdaq Trade Reporting Facility, Finra says.

In the second case, Merrill allegedly failed to obtain the best price on 551 trades, failed to execute trades in 1,380 instances and incorrectly marked more than 7,600 orders, according to the document. The regulator also alleges that in both cases Merrill lacked adequate supervisory systems during the periods in question.

Finra ordered Merrill to pay a total of $650,000 in fines for violations in best execution, supervision, books and records, customer confirmations, trade reporting and market order timeliness, according to the regulator.

Merrill must also pay $124,128 in restitution to the affected clients, according to the document.

By Alex Padalka