Monday, June 16, 2014

Merrill Lynch fined $8M for mutual fund overcharges

Bank of America’s Merrill Lynch unit has been fined $8 million and ordered to pay $24.4 million in restitution to settle claims it overcharged thousands of charities and retirement accounts by failing to waive mutual fund fees, a regulator said Monday.

According to the regulator, the Financial Industry Regulatory Authority, the restitution for affected customers is in addition to $64.8 million Merrill has already repaid to harmed investors.

Merrill did not admit to or deny the charges, but it consented to the entry of FINRA's findings.

In offering shares for sale, some mutual funds waive upfront sales charges for retirement accounts and charities, according to FINRA.

Most of the mutual funds sold on Merrill’s retail platform offered waivers to retirement plan accounts, the regulator said. But at various times since at least January 2006, Merrill did not waive sales charges for some customers, according to FINRA.

That impacted approximately 41,000 small-business retirement plans and approximately 6,800 charities and retirement plan accounts for ministers and employees of public schools, FINRA said. Those customers either paid sales charges when buying certain shares or bought other share classes that unnecessarily subjected them to higher ongoing fees and expenses, according to the regulator.

Merrill learned in 2006 that its small-business retirement plan customers were overpaying but continued to sell them more costly shares and failed to report the issue to FINRA for more than five years, the regulator alleged.

In an email to the Observer, Merrill spokesman Bill Halldin said that following Bank of America’s 2009 purchase of Merrill, the bank found that certain Merrill clients were not given the fee waivers when they bought some mutual funds.

He said the bank notified FINRA about the findings and voluntarily began making refunds to clients who were affected.

FINRA is a Washington, D.C.-based private company that polices brokerages and exchanges. 

Earlier this month, in an unrelated action, FINRA said it fined Merrill $1 million over claims it provided inaccurate information about trades over an eight-year period.


Anonymous said...

stay classy, Merrill.