Merrill Fined $1 Million by Finra for Overcharging on Trades
Merrill Lynch, the brokerage unit of Bank of America Corp. (BAC), was fined $1.05 million by Wall Street’s self-regulator for overcharging customers who traded nonconvertible preferred securities.
Clients who used ML BondMarket traded at worse prices than the national best bid and offer on 12,259 occasions from 2006 to 2010 due to faulty programming, the Financial Industry Regulatory Authority said today in a statement. The brokerage was also ordered to pay $323,000 in restitution.
“It is paramount that a broker-dealer’s systems are adequately designed to ensure that customers receive fair prices in securities transactions,” Thomas Gira, Finra’s head of market regulation, said in the statement. The issues at Merrill Lynch resulted in “many customers receiving inferior prices for more than four years,” he said.
Merrill Lynch’s bond-trading platform was programmed to automatically execute trades of fewer than 5,000 shares based on published quotes, according to Finra’s complaint. The system only looked at prices on the primary exchanges where the securities were listed, the regulator said.
“This matter, which pre-dated Bank of America’s acquisition of Merrill Lynch, was caused by a processing issue that has been corrected,” William Halldin, a spokesman for the Charlotte, North Carolina-based bank, said in an e-mail. “We have compensated affected clients.”
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