The US securities regulator has charged Merill Lynch, a broker-dealer and investment management firm, for failing to file hundreds of Suspicious Activity Reports (SARs) for over a decade, starting from 2009. However, the Securities and Exchange Commission (SEC) announced today (Tuesday) that Merrill Lynch and BAC North America Holding Co. (BACNAH), its parent company, have agreed to a censure and to pay $6 million in civil penalty to settle the charges, without admitting or denying the regulator’s findings.

Merrill Lynch's Decade-Long Failure

In a separate action on Tuesday, the Financial Industry Regulatory Authority (FINRA) fined Merrill Lynch $6 million for the same failure. The membership-based industry regulator noted that suspicious activities such as alleged unauthorized debit card withdrawals, forged or altered checks, account intrusions, identity theft and internet scams, went unreported as a result of Merrill Lynch's failure.

“Following the 2009 merger between Merrill Lynch and Bank of America, N.A., Merrill Lynch incorrectly applied the $25,000 monetary threshold applicable to national banks, rather than the $5,000 threshold applicable to broker-dealers, when determining whether to file a SAR,” FINRA explained. “As a result, Merrill Lynch failed to file approximately 1,500 SARs from January 2009 to November 2019, when the firm discovered and corrected its mistake.”

On its part, the SEC pointed out that BACNAH handled the creation and execution of Merrill Lynch’s SAR policies and procedures. It also oversaw the subsidiary’s filings of these reports.

“Merrill Lynch and BACNAH did not file hundreds of Merrill Lynch SARs because they failed to comply with one of the most basic requirements for a SAR program,” said Katharine Zoladz, the Co-Acting Regional Director of the SEC’s Los Angeles Regional Office.

As a self-regulatory organisation, FINRA keeps active tabs on securities firms doing business in the United States. The membership organization serves to protect investors and the integrity of the US securities market.

Since the start of the year, FINRA has slapped varying monetary fines on several industry members, including Credit Suisse Securities, SageTrader, UBS Securities, BGC Financial, and Nomura Securities. The fines are penalties for violations such as money laundering prevention, inaccurate monthly statistics, and late and inaccurate submissions of Trade Reporting and Compliance Engine (TRACE) reports.

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