The Financial Industry Regulatory Authority announced Wednesday that it has fined a Merrill Lynch broker-dealer subsidiary $1 million over claims the company failed to mediate disputes with employees over bonuses.
Wednesday, January 25, 2012
FINRA is a private company that policies brokerages and exchanges. Merrill Lynch, Pierce, Fenner & Smith accepted the penalty without admitting or denying the claims, according to the settlement agreement.
In January 2009, after Bank of America acquired Merrill Lynch, the investment bank started a $2.8 billion bonus program to retain employees, but had them agree to waive their rights to arbitrate disagreements, according to FINRA. That breaks FINRA rules, the agency said.
Merrill also structured the bonus program as a loan from an affiliate instead of the firm itself. When some employees left the company, Merrill Lynch used New York state courts to seek repayment instead of arbitration, FINRA said.
"Merrill Lynch specifically designed this bonus program to bypass FINRA's rule requiring firms to arbitrate disputes with employees, and purposefully filed expedited collection actions in New York State courts and denied those registered representatives a forum to assert counterclaims," FINRA enforcement chief Brad Bennett said in a statement.
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