Merrill Lynch, Pierce, Fenner & Smith, Inc., a subsidiary of
Bank of America Corporation
) was recently fined by the Financial Industry Regulatory Authority
(:FINRA) for overcharging clients holding certain charities and
retirement accounts in the bank. Apart from paying an $8 million
fine, BofA has to return investors the amount unduly charged by it.
BofA has already reimbursed $64.8 million to the affected
customers. So, the restitution amount presently stands at $24.4
million for the company.
The latest fine pertains to the troubled Merrill Lynch unit bought
by BofA during the financial crisis. Allegedly, the acquired unit
did not offer mutual fund fee waivers for certain customers.
The FINRA further clarified that most mutual funds waive their
sales charge for clients holding retirement or charity accounts.
Merrill Lynch also offered similar fee waivers, as mentioned in
However, the company had failed to train its advisors properly
regarding the fee waivers and alternative lower cost investment
strategies. This misled the investors and they were made to pay
additional charges as a result of the fallacy.
This impacted nearly 41,000 small business retirement plan accounts
and approximately 6,800 charities and 403(b) retirement accounts.
Further, the company, in spite of being aware of the wrong doing by
2006 had informed the FINRA only in 2011.
Though Merrill Lynch neither accepted nor rejected the charges, it
has agreed to co-operate with the regulatory authority. Moreover,
this is not the first time that BofA is fined for overcharging the
Earlier in Jun 2012, the FINRA penalized Merrill Lynch $2.8 million
for supervisory negligence which led to overcharging of nearly
95,000 customers in unnecessary fees and failure to provide certain
required trade notices. Other Wall Street biggies penalized by the
FINRA for various rule violations include
The Goldman Sachs Group, Inc.
), Wells Fargo & Company and Citigroup Inc.
The regulatory scenario following the financial crisis in the U.S
has tightened, with litigation issues heavily weighing against
BofA's performance in the preceding few quarters. Nevertheless, the
stringent regulations prioritize investors' security, thereby
considerably reducing the chances of financial fallout going
BofA currently carries a Zacks Rank #4 (Sell).
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