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Merrill Lynch to pay $26.5 million settlement over sales force's credentials

Tuesday, September 8, 2009 | 5:02 p.m. CDT; updated 5:48 p.m. CDT, Tuesday, September 8, 2009

AUSTIN, Texas The Texas state securities commissioner said Bank of America's Merrill Lynch unit will pay up to $26.5 million to seven states, including Missouri, in a settlement stemming from a Texas claim that the brokerage allowed unregistered salespeople to sell securities.

Texas will receive $1.6 million in the settlement with Merrill Lynch, Pierce, Fenner & Smith Inc. The Texas State Securities Board led a task force that investigated the broker's "failure to supervise its client associates," Commissioner Denise Voight Crawford said in a Sept. 3 release.

The probe followed a tip from a Merrill Lynch employee made in May 2008, before the broker was bought by Bank of America. The tip said the company saved registration fees by having client associates register in just two states, their home state and one neighboring state.

Since client associates accept trade orders, they should be registered in the client's state as well as their home state. The Texas investigation found that Merrill Lynch's supervisory system "was not reasonably designed to ensure that its client associates complied with registration requirements."

Besides Texas and Missouri, the states in the task force were Colorado, Arizona, Vermont, New Hampshire and Delaware. Crawford said the task force members suspect similar registration issues may exist at other financial services firms.

 


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