Merrill Lynch Fined for Supervisory Failures
From the desk of Jim Eccleston at Eccleston Law
Merrill Lynch has reached an $825,000 settlement with FINRA over allegations of inadequate supervision concerning retail orders and recordkeeping practices dating back to 2017.
As reported by AdvisorHub, Merrill Lynch's supervisory system exhibited deficiencies in reviewing the timeliness of order executions processed through its electronic order systems. While the system assessed orders from routing to final execution, it failed to capture the preceding period when orders were entered and verified for accuracy and regulatory requirements. Over a three-year "sample" period, Merrill received nearly 300 million electronic orders through its five electronic order systems, FINRA reported, without specifying if the issues involved Merrill financial advisors or Merrill Edge clients.
AdvisorHub reports that while FINRA did not allege customer harm, it referred to Rule 5310, which mandates brokerages to exercise "reasonable diligence" to ensure favorable pricing for customers. Consequently, Merrill Lynch was found in violation of FINRA Rule 3110, mandating the establishment and maintenance of a supervisory system for compliance, and Rule 2010, which demands high standards of commercial honor.
In addition to the fine, Merrill Lynch consented to a censure and agreed to certify within 90 days that it had addressed the identified issues and implemented a supervisory system designed for compliance, as per FINRA's statement.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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