Pursuant to the conversations, and in a break from ordinary practices, the Merrill Lynch governance committee did not vote and chose to defer action on termination. In doing so, the governance committee lifted the product hold and opened the third-party products to new Merrill Lynch accounts. In the end, the SEC’s order found that Merrill Lynch failed to disclose to its clients the conflict of interest in its decision-making process.
Failure to Disclose Material Facts
“By failing to disclose its own business interests in deciding whether certain products should remain available to investment advisory clients, Merrill Lynch deprived its clients of unbiased financial advice,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Retail clients must feel confident that their advisors are eliminating or disclosing such conflicts and fulfilling their fiduciary duties.”
Without admitting or denying the findings, Merrill consented to the SEC’s order, which finds that the firm was negligent in violating the antifraud policies and procedures provisions of the Investment Advisers Act of 1940. Merrill agreed to pay more than $4 million in disgorgement, $806,981 in prejudgment interest and a more than $4 million penalty.
