Merrill Lynch Settles SEC Charges, Will Pay $415M

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Merrill Lynch Settles SEC Charges, Will Pay $415M

Merrill Lynch has agreed to pay $415 million and admit wrongdoing to settle charges filed by the SEC accusing the firm of misusing customer cash to create profits, according to the commission.

“An SEC investigation found that Merrill Lynch violated the SEC’s customer protection rule by misusing customer cash that rightfully should have been deposited in a reserve account,” the SEC said in a statement. “Merrill Lynch engaged in complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account.”

The firm’s actions created billions of dollars a week from 2009 to 2012. It used the money to finance its own trading activities. Clients would have experienced a “massive shortfall” in the reserve account if the firm had failed in these trades, said the SEC.

Between 2009 and 2015, Merrill Lynch also held as much as $58 billion per day of customer securities in a clearing account subject to a general lien by its clearing bank. There were additional customer securities in accounts across the globe that also were subject to liens. All of these securities were exposed to significant risk and uncertainty of clients getting their securities back in the event the firm folded.

“The rules concerning the safety of customer cash and securities are fundamental protections for investors and impose lines that simply can never be crossed,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Merrill Lynch violated these rules, including during the heart of the financial crisis, and the significant relief imposed today reflects the severity of its failures.”

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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