For the second time in the last few months, Merrill Lynch,
Pierce, Fenner & Smith Inc. - a wholly owned subsidiary of
Bank of America Corporation
) - has been fined by the Financial Industry Regulatory Authority
(FINRA). Merrill will pay $500,000 as penalty for its supervisory
failure or missing deadline for filing nearly 650 reports related
to the brokers' updates and details regarding customer complaints
as well as settlements.
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.
The FINRA stated that such failures occurred between 2005 and 2011.
Also, Merrill did not provide proper instructions nor did it
supervise its employees who were responsible for tracking and
reporting such customer complaints. As a result, these violations
went unnoticed for years.
As per the FINRA rules, the brokerage firms are required to provide
updated information regarding its brokers including criminal and
civil complaints as well as regulatory actions against them along
with the customer complaints and settlements. Further, all the
required information should be made available within 30 days. In
addition, the firms must submit a form while hiring a new broker or
when the broker leaves.
In case of Merrill, the FINRA commented that the breaches might
have hampered investors' ability to assess the background of some
brokers through the FINRA's public disclosure system - BrokerCheck.
Further, the violations hindered other brokerage firms' ability to
conduct background checks while hiring and lowered the ability of
the regulators to review brokers' transfer applications.
Earlier in June, the FINRA had penalized Merrill $2.8 million for
supervisory failures related to overcharging nearly 95,000
customers in unnecessary fees and failure to provide certain
required trade notices. While imposing the fine, the FINRA stated
that from April 2003 to December 2011 Merrill did not have a proper
system in place to check whether the customers were charged in
accordance to their contracts. This had resulted in $32 million of
unwarranted fees charged from the clients.
In the recent months, other Wall Street biggies whose units were
penalized by the FINRA for various rule violations include
The Goldman Sachs Group, Inc.
Wells Fargo & Company
Though Merrill neither admitted nor denied the charges levied by
the FINRA, the penalty will somewhat dent the brokerage firm's
goodwill. This is also expected to marginally hamper its financial
performance in the near term.
Currently, Bank of America retains a Zacks #3 Rank, which
translates into a short-term Hold rating. Also, considering the
fundamentals, we maintain a long term 'Neutral' recommendation on