FINRA Censures And Fines Merrill Lynch For Financial Industry Rule Violations

The Financial Industry Regulatory Authority recently censured Merrill Lynch Pierce Fenner & Smith and fined the firm $100,000, sanctions to which the firm consented.  These sanctions relate to Merrill Lynch’s alleged violation of several industry rules, including FINRA Rules 4370 and 2010.  FINRA alleged that Merrill Lynch “failed to send required regulatory disclosures and notices in connection with the opening of approximately 12,989 [f]irm accounts” from early 2010 to early 2011.

This does not appear to be Merrill Lynch’s first such brush with the regulators over related violations.  In 2012, Merrill Lynch was fined $2.8 million by FINRA amid allegations the firm overcharged customers more than $32 million due to an inadequate supervisory system in place at the firm.  FINRA also specifically alleged that the Merrill Lynch failed to send necessary business continuity plans to more than 16,000 customers and failed to send required margin risk disclosure statements to nearly 7,000 customers over several years.

Margin can be a risky proposition for investors because it involves borrowing money from the firm for the purpose of “leveraging” positions in the account.   While margin can boost profits in the portfolio, it can also magnify losses.  For this reason, margin is typically unsuitable for most investors, especially those is with limited investment experience and those who cannot afford to incur significant losses.

Not just limited to margin borrowing, disclosure is also very important in the financial services industry, generally.  There are numerous rules and regulations that cover the disclosures firms are required to send their customers. The main goal of many of these regulations is investor protection.  While these required disclosures should not be confused with a cure-all for fraud, when they are not sent to customers, the window for fraud opens even wider.

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options. If you or a family member invested in exchange traded funds, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel.