SEC Fines Merrill Lynch $415 Million For Misusing Customer Cash

By Markets MarketWatch Pulse

The Securities and Exchange Commission on Thursday said Merrill Lynch, a unit of Bank of America , agreed to settle charges it took advantage of customers and will pay a $415 million fine. The firm admitted that it misused customer cash to generate profits for the firm and failed to safeguard customer securities from the claims of its creditors. Merrill Lynch violated the SEC's Customer Protection Rule, according to the regulator, by misusing customer cash and engaging in complex options trades that lacked economic substance and artificially reduced those customer cash balances. From 2009 to 2012 Merrill Lynch used the billions freed up each week by the scheme to finance its own trading activities. Merrill Lynch exposed its customers to a massive shortfall in their account if those trades had failed. Between 2009 to 2015, Merrill Lynch also held up to $58 billion per day of customer securities in a clearing account that was vulnerable to creditor claims in the event the firm had collapsed. Merrill Lynch also violated securities laws, according to the order, by using severance agreements to prevent former employees from voluntarily providing information to the SEC. The violations were reported to the SEC by former employees who acted as whistleblowers, according to the SEC.

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