Switch to ADA Accessible Theme
Miami Investment Fraud Attorney
305.372.9700
2655 South Le Jeune Road
Suite 1108
Coral Gables, FL 33134

FINRA Sanctions Merrill Lynch for Inadequate Supervision of Customer Accounts

On November 30th, 2016, the Financial Industry Regulatory Authority (FINRA) has announced more than $7 million in penalties against Merrill Lynch. The wealth management company was hit with $6.25 million in fines and was ordered to pay another $788,000 in restitution to the affected customers. Merrill Lynch consented to the sanctions, but did not admit to any wrongdoing. These complaints stem from the company’s failure to properly supervise the use of leverage in brokerage accounts from 2010 through 2014.

Merrill Lynch Facilitated Loans Backed By Securities, Did Not Supervise Customers

Merrill Lynch allowed many of its customers to obtain ‘loan management accounts,’ otherwise known as LMAs. These accounts were essentially lines of credit that could be obtained by clients using securities they had in other Merrill Lynch managed accounts as collateral. While Merrill has the right to operate these accounts, the bank also had an obligation to follow certain supervisory requirements when allowing customers to borrow money based off of their ownership of securities. In fact, there are many legal restrictions on what can be done with the funds in an LMA. Generally, those funds cannot be used to re-invest in certain types of securities. However, due to the company’s lack of supervision of these accounts, more than $100 million worth of LMA funds were used to purchase securities that should have been restricted. This allowed customers to access leverage through the brokerage accounts in manner that should not have been possible.

The Lack of Proper Supervision Led to Customers Making Unsuitable Investments

Additionally, FINRA found that Merrill Lynch’s inadequate supervision resulted in some clients making unsuitable investments. Indeed, as part of this settlement, FINRA ordered the company to pay 22 of its customers a collective $780,000 in restitution. This is on top of another round of voluntary customer reimbursement related to this issue. Once again, this stems back to the lack of supervision Merrill used when operating LMA accounts. The affected investors were generally of moderate net-worth and had conservative leaning investment objectives. Yet, through their LMA accounts, many of them ended up owning a large amount of highly levered Puerto Rican municipal bonds and securities. As Puerto Rico suffered serious economic trouble, these customers sustained major financial losses. Financial advisers and wealth management companies have a legal duty to ensure that they are helping their clients make investments that are truly suitable for their individual wants and needs. When they fail to do so, they can be held liable for losses.

Were You a Victim of Investment Fraud in South Florida?

Please do not hesitate to contact the experienced Miami investment fraud lawyers at Carlson & Associates, P.A. today. Our attorneys have handling many investment fraud claims, including unsuitable investment actions. Let us review your case so that we can determine precisely what needs to be done to protect your legal rights and financial interests. We provide legal representation to fraud victims throughout South Florida, including in West Palm Beach, Fort Lauderdale and Boca Raton.

Resource:

finra.org/newsroom/2016/finra-sanctions-merrill-lynch-7-million-inadequate-supervision-securities-backed

  • Super Lawyers
  • AV Preeminent
  • Million Dollar Advocates Forum
  • Judicial Edition 2021
  • Curtis Carlson 25th Anniversary
  • Curtis Carlson Judicial Edition 2022
  • Curtis Carlson Judicial Edition 2023
  • 2023 Judicial Edition Curtis Carlson
  • 2023 Martindale Hubbell Award Curtis Carlson
  • 2023 Lawyers.com Curtis Carlson
  • 2024 Martindale Hubbell Award Curtis Carlson
  • 2024 Martindale Hubbell Award Curtis Carlson
  • 2024 Martindale Hubbell Award Curtis Carlson
Location

Office
Location

2655 South Le Jeune Road
Suite 1108

Coral Gables, Florida 33134

Telephone: 305-372-9700
Fax: 305-372-8265

Connect
With Us

  • Facebook
  • Twitter
  • LinkedIn

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

No content on this site may be reused in any fashion without written permission from www.Carlson-Law.net

MileMark Media - Practice Growth Solutions

© 2015 - 2024 Carlson & Associates, P.A. All rights reserved. This law firm website is managed by MileMark Media.