Merrill Lynch and Harvest Volatility Management Fined $9.3 Million for Exceeding Client Investment Limits

Posted on October 10th, 2024 at 3:19 PM
Merrill Lynch and Harvest Volatility Management Fined $9.3 Million for Exceeding Client Investment Limits

From the desk of Jim Eccleston at Eccleston Law

According to SEC.gov, the Securities and Exchange Commission (SEC) has charged Merrill Lynch, Pierce, Fenner & Smith Inc., and Harvest Volatility Management LLC for exceeding clients’ designated investment limits, resulting in higher fees, increased market exposure, and financial losses. Both firms have agreed to pay a combined $9.3 million in penalties and disgorgement to settle the SEC's claims.

Harvest, the primary adviser for the Collateral Yield Enhancement Strategy (CYES), was responsible for managing accounts that traded options in a volatility index. Starting in 2016, Harvest allowed numerous accounts to surpass exposure limits pre-set by investors, with dozens exceeding their designated levels by 50% or more. This exposed clients to higher risks, while Harvest and Merrill earned larger management fees.

Merrill Lynch, which introduced clients to Harvest, received a portion of Harvest’s management and incentive fees, as well as trading commissions.

The SEC found that Merrill was aware of the excessive exposure but failed to notify affected clients, many of whom had existing advisory relationships with the firm.

Without admitting or denying the SEC’s findings, Harvest and Merrill agreed to cease-and-desist orders and censure. Harvest will pay $2 million in penalties, $3.5 million in disgorgement and interest, while Merrill will pay $1 million in penalties and $2.8 million in disgorgement and interest.

 

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

Tags: eccleston, eccleston law

Return to Archive

TESTIMONIALS

Previous
Next

I just wanted to say thanks again for preparing and executing my case in such a professional manner. It was a pleasure to watch two professionals take such pride in their work, as well as becoming personally in tune with your client (Me). I would personally recommend you and your firm to anyone.

John O.

LATEST NEWS AND ARTICLES

June 23, 2025
FINRA Fines AAG Capital for RILA Exchange Violations

The Financial Industry Regulatory Authority (“FINRA”) has fined AAG Capital $100,000 and ordered the firm to pay nearly $39,000 in restitution after finding it violated Regulation Best Interest (“Reg BI”) by recommending costly registered index-linked annuities (“RILAs") to retail clients in unsuitable product excha...

June 19, 2025
SEC Charges Former Real Estate CEO in $46 Million Investment Fraud Scheme

The Securities and Exchange Commission (“SEC”) has charged Kenneth Mattson, former CEO of LeFever Mattson, with orchestrating a $46 million investment fraud scheme that targeted approximately 200 investors, many of them retired senior citizens
from his church community in California.

June 18, 2025
Audit Firms Agree to $46 Million Settlement in GPB Capital Fraud Case

In a significant development in the GPB Capital fraud litigation, several audit firms have agreed to pay a combined $46 million to settle claims tied to their alleged involvement in the $1.8 billion scheme that impacted roughly 15,000 investors, as reported by DI Wire.