|Merrill Lynch, Pierce, Fenner & Smith Inc. Action|
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined Merrill Lynch, Pierce, Fenner & Smith Inc. $500,000 for supervisory failures that allowed widespread deficiencies in filing hundreds of required reports, including customer complaints, arbitration claims, and related U4 and U5 filings, and for its failure to file the required reports. The violations, which went undetected for several years, may have hampered investors' ability to assess the background of certain brokers via BrokerCheck, FINRA's public disclosure program. They also may have compromised firms' ability to conduct background checks when making hiring decisions, reduced the ability of securities regulators to review brokers' transfer applications and hindered FINRA from promptly investigating certain disclosure items.
Brad Bennett, FINRA's Executive Vice President and Chief of Enforcement, said, "Firms that fail to file important regulatory information in a timely manner can compromise the integrity of CRD and BrokerCheck. In this instance, Merrill Lynch failed to report critical information that regulators and investors rely upon. Without timely and accurate reporting by firms, investors only have part of the picture when researching and making decisions about their brokers."
Under FINRA rules, when a securities firm hires a broker, it must ensure that information on the broker's registration application (Form U4) is updated and kept current on the Central Registration Depository (CRD) system. The firm is required to update that information whenever reportable events occur, including regulatory actions against the broker, specific customer complaints, settlements involving the broker, and felony charges and convictions. Normally, those updates must be filed within 30 days of the event. Firms also are required to notify FINRA within 30 days of the termination of a registered person's association with a member firm by filing a notice known as Form U5. Firms also must notify FINRA within 30 days of learning that information disclosed on a Form U5 filed for a broker has become inaccurate or is incomplete.
In the Merrill Lynch case, FINRA found that:
In concluding the settlement, Merrill neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
FINRA's investigation was conducted by Josefina Martinez and Elizabeth DaSilva under the supervision of Susan Light and Richard Chin.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2011, members of the public used this service to conduct 14.2 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.