Merrill Lynch was assessed an $825,000 penalty by the Financial Industry Regulatory Authority (FINRA) for alleged supervision failures regarding the execution of marketable equity orders entered into its electronic order systems.
CW Event Spotlight
Compliance Week’s Financial Crimes and Regulatory Compliance Summit will take place June 10-11 at Fordham Law School in Manhattan, New York. The event agenda includes 40+ speakers, including representatives from the SEC, CFTC, FINRA, FBI, OFAC, BIS, and more.
View the agenda below. For inquiries regarding registration, contact Donna O’Neill.
LIMITED TIME OFFER: Use code DONNA15 at checkout for a discounted rate.
The firm failed to establish and maintain written supervisory procedures reasonably designed to achieve compliance with its best execution obligations, FINRA said in a disciplinary notice published Thursday.
The self-regulatory organization found Merrill Lynch violated FINRA Rules 3110 and 2010.
The details: From at least February 2017 through the present, Merrill Lynch “failed to reasonably supervise whether it made every effort to execute marketable customer orders that it received fully and promptly,” according to FINRA.
During the period, the firm has had five electronic order systems processing hundreds of millions of orders. As part of its validation checks, Merrill Lynch only reviewed the execution timeliness of orders processed through the systems from the time the orders were routed to a market center for further handling or execution and the final execution time, FINRA said, and did not review how long it took the systems to process and route orders to a market center.
The firm also fell short of FINRA and Securities and Exchange Commission recordkeeping requirements by not ensuring the accuracy of information recorded on its order memoranda for retail brokerage equity orders received electronically, the notice alleged.
Compliance considerations: The matter originated from a review by FINRA’s Market Regulation Department, the organization said.
FINRA also noted the allegations pertained to Merrill Lynch’s retail customer equity orders and not to institutional orders of BofA Securities, under which the firm’s investment banking and institutional brokerage businesses have resided since May 2019.
Bank of America declined to comment.
No comments yet