Merrill Lynch Has a Total of 536 Regulatory Sanctions

Merrill LynchPublicly available records published by the Financial Industry Regulatory Authority (FINRA) on February 9, 2017 indicate that New York-based broker-dealer Merrill Lynch has been sanctioned over alleged rule violations relating to Loan Management Accounts (LMAs). Fitapalli Kurta is interested in speaking to investors who have complaints regarding Merrill Lynch (CRD# 7691).

Founded in Delaware in 1958, Merrill Lynch is headquartered in New York, New York and registered with 53 US states and territories. Thomas Montag is Chief Executive Officer; Joseph Guarding is Chief Operations Officer; Lizbeth Applebaum is Chief Financial Officer.

According to the firm’s BrokerCheck report, Merrill Lynch has received 536 regulatory actions, and 1,001 customer disputes that evolved into arbitration.

In November 2016 FINRA sanctioned Merrill Lynch following allegations the firm inadequately supervised the use of proceeds originating under a securities-based lending program called Loan Management Accounts. According to the letter of Acceptance, Waiver and Consent (AWC# 2014042578001) signed by the firm, Merrill also failed to establish and enforce adequate supervisory procedures relating to the suitability of trades involving Puerto Rico securities, including “including municipal bonds and closed-end funds, where customers’ holdings were highly concentrated in PR Securities and highly leveraged through either LMAs or margin.”

A FINRA press release describes LMAs as “lines of credit that allow the firm’s customers to borrow money from an affiliated bank using the securities held in their brokerage accounts as collateral.” The release also states: “from January 2010 through November 2014, Merrill lacked adequate supervisory systems and procedures regarding its customers’ use of proceeds from these LMAs. More specifically, FINRA found that although both Merrill policy and the terms of the non-purpose LMA agreements prohibited customers from using LMA proceeds to buy many types of securities, the firm’s supervisory systems and procedures were not reasonably designed to detect or prevent such use. FINRA further found that during the relevant period, on thousands of occasions, Merrill brokerage accounts collectively bought hundreds of millions of dollars of securities within 14 days after receiving incoming transfers of LMA proceeds.”

FINRA also separately found that Merrill Lynch, from January 2010 through July 2013, did not have supervisory systems adequate to ensure the suitability of Puerto Rican securities transactions, and specifically that “25 leveraged customers with modest net worths and conservative or moderate investment objectives, and with 75 percent or more of their account assets invested in Puerto Rican securities, suffered aggregate losses of nearly $1.2 million as a result of liquidating those securities to meet margin calls.”

For these alleged violations, FINRA fined Merrill Lynch $6.25 million and ordered the firm to pay about $780,000 in restitution.

If you or someone you know has lost money investing with Merrill Lynch, call Fitapelli Kurta at 877-238-4175 for a free consultation. You may be eligible to recoup your losses. Fitapelli Kurta accepts all cases on a contingency basis: we only get paid if and when you collect money. Time to file your claim may be limited, so we encourage you to avoid delay. Call 877-238-4175 now to speak to an attorney for free.