The Financial Industry Regulatory Authority (“FINRA”) has sanctioned Merrill Lynch $6 million for selling shares in initial public offerings (IPOs) to industry insiders, including employees’ immediate family members and customers who were brokers at other brokerage firms.
FINRA found that from 2010 through March 2018, Merrill Lynch made at least 1,462 prohibited sales of IPO shares in 325 different offerings to 149 customer accounts. The shares offered included IPOs in highly sought after stocks such as Facebook, LinkedIn, Twitter, and GM. At least 120 different financial advisors in 79 Merrill Lynch branch offices effected the sales.
FINRA rules prohibit who may purchase IPOs to ensure that FINRA members do not provide favorable treatment to industry insiders at the expense of the investing public. FINRA Rule 5130 restricts member firms, like Merrill Lynch, from selling IPO shares to immediate family members and customers who are associated with other broker-dealers.
FINRA also found that Merrill Lynch’s violations occurred because of compliance and supervisory failures, including failure to use information in its own customer records to prevent the sales of IPO shares to restricted persons, failing to respond reasonably when it learned of the prohibited sales, and failure to reasonably train its employees to comply with the IPO restriction rule.
Merrill Lynch neither admitted nor denied the FINRA charges, but consented to the entry of FINRA’s findings.
The Frankowski Firm represents aggrieved investors who have lost money due to an investment that was misrepresented to them or was unsuitable for their investment needs. If you lost money as a result of an unsuitable or misrepresented investment, whether at Merrill Lynch or another firm, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.