$950,000 Fine to Merrill – Flawed Supervision Allowed Two Advisors to Steal $6M

According to Advisor Hub, the Financial Industry Regulatory Authority has censured and imposed a $950,000 fine on Merrill Lynch Wealth Management for allegations that they engaged in ignoring flaws in its fraud detection systems allowed for two of their brokers to steal $6 million from clients.

“Merrill’s systems did not properly screen Automated Clearing House transfers from customers’ accounts to detect when one of its registered representatives was the beneficiary of those transfers,” FINRA said. Merrill’s internal fraud-detection system was only “designed to detect fraud by third parties” or “persons other than its own brokers,” it continued.

Between 2011 and 2017, “representative 1” stole roughly $3.2 million, according to the settlement document.

​​”Had it done so, the firm could have uncovered Representative 1’s theft,” Finra wrote in the ruling.

“representative 2,” stole around $3.2 million, the settlement document continued.

Finra noted that the settlement marks the second time it has censured and fined Merrill for failing to monitor transfer of customer funds to third-party accounts.

according to FINRA’s website and others at Advisor Hub, Finra said Merrill violated Rule 3110 and others, which require brokerages to monitor customer fund transfers and maintain supervisory systems and to enforce policies and procedures, which are “reasonably designed to review and monitor all transmittals of funds from customers to third party accounts, to outside entities, and to locations other than a customer’s primary residence.”

Additionally Rule 2010 requiring it to “observe high standards of commercial honor”.

Merrill, which has since updated its compliance systems, settled the case without admitting or denying the findings. The firm has also “made reasonable efforts to pay restitution to each of the customers or their estates,” the letter said

Miller Stern Lawyers, LLC, a Baltimore Securities Fraud Law firm, currently represents investors for claims of fraud, investment losses and FINRA misconduct, as well as UIT switching, unauthorized trading, over concentration, irregular options trading, margin and unsuitability claims, broker fraud, securities fraud, securities litigation and other broker and broker/dealers for investment losses and fraud.  If you or anyone you know have experienced investment losses from the actions above or other situations, please call 410-LAW-FIRM ( 410-529-3476 ) or fill out the contact us form for a no cost consultation and evaluation of your claim.


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