Merrill Lynch and Bank of America Fined $3 Million for Failing to Monitor Manipulative Trading

Posted on September 18th, 2024 at 10:53 AM
Merrill Lynch and Bank of America Fined $3 Million for Failing to Monitor Manipulative Trading

From the desk of Jim Eccleston at Eccleston Law

Merrill Lynch and its parent company, Bank of America, have agreed to pay a $3 million fine and accepted censure from FINRA for their failure to properly monitor potentially manipulative trading activities. According to AdvisorHub, the settlement stems from the firms' reliance on flawed third-party surveillance systems that failed to detect suspicious trading practices, such as wash trading and prearranged trades.

According to the Acceptance, Waiver, and Consent (“AWC”), the violations occurred at Merrill Lynch from 2015 to the present, and at Bank of America Securities, the bank's institutional broker-dealer, from 2019 to the present. The surveillance systems used by both entities were found to have overly narrow alert parameters, causing them to miss significant potentially manipulative trades. Specifically, the firms failed to review alerts related to 700 potentially manipulative equity trades and around 125,000 options trades. The settlement highlighted violations of FINRA Rule 3011, which mandates effective supervisory systems, and Rule 2010, requiring firms to uphold high standards of commercial honor.

 

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

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