Wednesday, June 4, 2014

Merrill Lynch fined $1M for inaccurate trade data

Bank of America's Merrill Lynch unit was fined $1 million by a U.S. regulator on Wednesday over claims it provided inaccurate information about trades over an eight-year period.

Merrill Lynch violated federal securities laws and rules by submitting the inaccurate data to various regulators from March 2006 to January 2014, the Financial Industry Regulatory Authority said. In addition, Merrill Lynch failed to have in place an adequate audit system to ensure compliance with federal securities laws, according to Finra.

Finra also said Wednesday it has fined and censured Barclays Capital and Goldman Sachs & Co. over similar allegations. Merrill, Barclays and Goldman did not admit or deny the charges but consented to the entry of Finra's findings, according to the regulator.

"We take our reporting obligations very seriously and are working to enhance our process," Bill Halldin, Merrill Lynch spokesman, said in email to the Observer.

Over the eight-year period, Merrill Lynch submitted at least 5,323 inaccurate "blue sheets" to regulators, including the Securities and Exchange Commission, according to Finra. The blue sheets provide regulators with "critical" information to spot suspicious trading activity and insider trading, Finra said.

Merrill Lynch's blue sheets failed to include customer names and addresses for trades made on the same day the customer opened a Merrill Lynch account, according to Finra. The blue sheets became inaccurate whenever a trade occurred in a new customer's account before the customer's data was fully entered into all of Merrill Lynch's databases, Finra said. That resulted in "no name" listed on the sheets associated with those trades. 

"Merrill Lynch's failure to submit accurate blue sheets had a negative impact on regulatory investigations into possible violations of securities laws, as suspicious trading often occurs shortly after a customer opens a securities account," Finra said.

Finra said Merrill Lynch has agreed to conduct a review of its policies, systems and procedures for compiling and submitting blue sheet data as well as for the auditing deficiencies the regulator said it found.

Wednesday's violations come after the New York Stock Exchange in 2006 censured Merrill Lynch and fined it $500,000 for failing to provide accurate blue sheet information and for failing to establish and maintain appropriate systems and procedures for accurate blue sheet reporting. Merrill Lynch did not admit or deny the charges in reaching a settlement with the NYSE.

The fines announced Wednesday are unrelated to a disclosure Bank of America made earlier this week that it sent incorrect information to Finra on trading volume in "dark pools," alternative trading systems where trading occurs away from traditional stock exchanges.

On Tuesday, Bloomberg reported that Bank of America initially told Finra that its Instinct X dark pool handled 428 million shares, making it the largest U.S. alternative trading system for the week of May 12-18.

Bank spokesman Zia Ahmed told Bloomberg that the bank made an error calculating the volume it sent to Finra and has submitted a correction that is expected to cut its volume in half.

Ahmed did not provide comment to the Observer on the dark pool miscalculation.


Garth Vader said...

To He!! with these "civil settlements". PUT THESE SWINE IN JAIL!