Merrill Lynch, Pierce, Fenner & Smith Incorporated has reached a settlement with the Financial Industry Regulatory Authority (FINRA).
Merrill Lynch, Pierce, Fenner & Smith Incorporated has reached a settlement with the Financial Industry Regulatory Authority (FINRA).
Merrill Lynch, Pierce, Fenner & Smith Incorporated has reached a settlement with the Financial Industry Regulatory Authority (FINRA), agreeing to pay a $2 million fine due to significant reporting inaccuracies spanning over a decade. The settlement stems from the firm’s failure to properly report more than two million retail customer transactions involving TRACE-eligible securities from March 2010 to September 2020.
Specifically, the firm reported erroneous execution times for approximately 1,576,000 primary market transactions in market-linked securities. This was a violation of FINRA Rules 6730(c)(8) and 2010. Additionally, Merrill Lynch under-reported 422,197 allocations of various TRACE-eligible securities to client accounts, violating several FINRA regulations, including Rules 6730(a)(4) and 6730(a)(5).
Moreover, the firm failed to apply the No Remuneration (NR) indicator for 179,734 U.S. Treasury securities transactions, which lacked transaction-based compensation. This omission contravened FINRA Rules 6730(d)(1) and 6730(d)(4)(F).
The irregularities were not just about TRACE reporting. Between September 2017 and February 2019, the firm incorrectly reported 65,335 municipal securities transactions to the Real-Time Reporting System (RTRS) for retail customers, violating MSRB Rule G-14(b).
FINRA’s investigation revealed that Merrill Lynch’s supervisory systems for TRACE and RTRS reporting were inadequately designed, breaching NASD Rule 3010 and several other FINRA rules from March 2010 through September 2020 and MSRB Rule G-27 from September 2017 to December 2019.
In addition to the financial penalty, Merrill Lynch has also agreed to a formal censure as part of the settlement, emphasizing the importance of accurate reporting and compliance within the financial industry.
The firm’s extensive reporting failures not only highlight significant lapses in compliance but also emphasize the need for robust supervisory systems to ensure adherence to regulatory standards. This settlement serves as a reminder to financial institutions of the potential repercussions of inadequate reporting practices and the necessity of maintaining rigorous oversight to protect investors and uphold market integrity.
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