Merrill Lynch Breach of Fiduciary Responsibility
The Securities and Exchange Commission levies hefty monetary penalties on preeminent Wall Street brokerage firm, Merrill Lynch. The firm, for not adequately supervising its Residential Mortgage Backed Securities (RMBS) traders, must pay more than $15 million. The monetary penalty is to settle charges for its employees misleading customers into overpaying for RMBS securities. As is customary with large financial institutions, Merrill Lynch agrees to repay more than $10.5 million to its customers and to pay penalties of approximately $5.2 million.
The SEC discovers that Merrill Lynch employees deceive clients regarding the price Merrill Lynch pays to obtain RMBS securities. In doing so, the Merrill Lynch salespersons convince customers to overpay for the RMBS securities. Further, the SEC determines that Merrill Lynch’s RMBS traders and salespersons illegally profit from excessive and secretive commissions. In some instances, the “mark-ups” were double the customary fee. Effectively, Merrill Lynch fails miserably in the compliance realm, in that it lacks the requisite procedures to prevent and detect the misconduct. Because of the failure, Merrill Lynch profits to the detriment of its own customers.
