Merrill Fined $950K After Supervision Enabled Two Advisors To Misappropriate $6 Million

Posted on December 27th, 2021 at 1:08 PM
Merrill Fined $950K After Supervision Enabled Two Advisors To Misappropriate $6 Million

From the Desk of Jim Eccleston at Eccleston Law:

The Financial Industry Regulatory Authority (FINRA) has ordered Merrill Lynch to pay a $950,000 fine for allegedly failing to detect flaws in its fraud detection systems, which allowed two advisors to misappropriate $6 million. Both advisors received prison sentences. 

The settlement illustrates how the two advisors, Christopher Hibbard and Marcus Boggs, stole $6 million. According to FINRA, Merrill’s fraud detection systems did not adequately screen Automated Clearing House (ACH) transfers from client accounts to potentially alert the firm that one of its advisors was the beneficiary of the transfers. Despite FINRA’s warning to Merrill in 2013 about potential issues with its oversight of client fund transfers, the firm failed to implement any changes or follow-up on the red flags until 2018. 

Hibbard misappropriated at least $3.2 million via 270 unauthorized ACH transfers from five client account between 2011 and 2017, according to FINRA. On the other hand, Boggs stole $3.2 million between 2007 and 2018 through at least 200 unauthorized ACH transfers from eight client accounts. The transferred funds were primarily used to cover credit card bills, according to FINRA. Merrill Lynch agreed to the settlement without admitting or denying FINRA’s findings, and the firm has since updated its compliance policies and procedures. 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, merrill, fines, finra

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