Bank of America Merrill Lynch reached an agreement with the New York Attorney General’s Office to settle the investigation into its electronic trading services.
Under the settlement agreement, Bank of America Merrill Lynch agreed to pay $42 million in penalty to New York State. The firm also admitted to violating the Martin Act, New York Securities Law and New York Executive Law.
In a statement, AG Eric Schneiderman said, “Bank of America Merrill Lynch went to astonishing lengths to defraud its own institutional clients…”
Bank of America Merrill Lynch used “masking” scheme
In its investigation, the AG’s Office found that Bank of America Merrill Lynch engaged in fraudulent activity for multiple years.
Starting in 2008, Bank of America Merrill Lynch concealed to its clients that it was routing millions of their orders for equity securities to electronic liquidity providers (ELPs). The AG’s Office noted that the firm’s scheme was intentional and systematic.
The firm admitted that it has undisclosed agreements with the ELPs including Citadel Securities, Knight Capital, D.E. Shaw, Two Sigma Securities, and Madoff Securities.