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SEC.gov | Merrill Lynch to Pay $415 Million for Misusing Customer Cash and Putting Customer Securities at Risk |
2024-03-25 00:55:23 |
In addition to the Customer Protection Rule violations, Merrill Lynch violated Exchange Act Rule 21F-17 by using language in severance agreements that operated to impede employees from voluntarily providing information to the SEC. Merrill Lynch also engaged in significant remediation in response to the Rule 21F-17 violation, including the revision of its agreements, policies and procedures, and the implementation of a mandatory annual whistleblower-training program for all employees of Merrill Lynch and its parent corporation, Bank of America. Merrill Lynch and Bank of America also agreed to provide employees, on an annual basis, with a summary of their rights and protections under the SEC’s Whistleblower Program.
The SEC separately announced a litigated administrative proceeding against William Tirrell, who served as Merrill Lynch’s Head of Regulatory Reporting when the firm was misusing customer cash in violation of the Customer Protection Rule. The SEC’s Enforcement Division alleges that Tirrell was ultimately responsible for determining how much money Merrill Lynch would reserve in its special account, and failed to adequately monitor the trades and provide specific information to the firm’s regulators about the substance and mechanics of the trades. The litigated administrative proceeding against Tirrell will be scheduled for a public hearing before an administrative law judge who will issue an initial decision stating what, if any, remedial actions are appropriate.
The SEC’s order finds that Merrill Lynch violated Securities Exchange Act Sections 15(c)(3) and 17(a)(1) and Rules 15c3-3, 17a-3(a)(10), 17a-5(a), 17a-5(d)(2)(ii), 17a-5(d)(3), 17a-11(e), and 21F-17. Its subsidiary Merrill Lynch Professional Clearing Corporation is charged with violating Sections 15(c)(3) and 17(a)(1) and Rules 15c3-3, 17a-3(a)(10) and 17a-5(a). Merrill Lynch cooperated fully with the SEC's investigation and has engaged in extensive remediation, including by retaining an independent compliance consultant to review its compliance with the Customer Protection Rule. Merrill Lynch agreed to pay $57 million in disgorgement and interest plus a $358 million penalty, and publicly acknowledged violations of the federal securities laws.