The SEC settlement indicates that Merrill Lynch sent millions of dollars in customer orders to other broker-dealers for execution while purposely concealing their activity as part of their so-called “masking.” practice. For five years, Merrill Lynch had routed some orders to broker-dealers referred to as “ELP”s, or “Electronic Liquidity Partners.” Merrill Lynch was routing their customer orders into smaller “child orders” for execution at ELPs and other external entities. Meanwhile, Merrill Lynch hid the involvement of ELPs and informed customers that all transactions occurred within the firm. The SEC alleged that Merrill Lynch created false reports; altered code to reconfigure FIX messaging systems; modified Transaction Cost Analysis reports and more to Merrill Lynch as the execution venue incorrectly. Did customers experience bad executions? Why create false reports?
Bank of America’s Merrill Lynch, Pierce, Fenner and Smith Incorporated has agreed to pay a $42 million-dollar settlement Securities and Exchange Commission for federal securities laws violations according to an Order Instituting Administrative and Cease-and-Desist Proceedings. According to the SEC’s order released Tuesday, Merrill Lynch admitted to fraudulently deceiving clients about the handling of their millions of orders to buy and trade stock. The Securities and Exchange Commission finds that Merrill Lynch “willfully violated” Sections 17(a)(2) and 17(a)(3) of the Securities Act. The case is an unfortunate reminder of the risks that even the most careful investors deal with when trusting financial institutions.
Merrill Lynch Pierce, Fenner and Smith Incorporated is a FINRA registered brokerage firm and investment advisor with 1559 total disclosures according to (CRD #7691) records on BrokerCheck. Although a Delaware corporation, Merrill Lynch’s principal offices are in Bryant Park, New York. Merrill Lynch’s business conduct includes mutual fund retail, investment advisory services; retailing corporate equity securities; selling variable life insurance or annuities, along with other securities and non-securities transactions.