SEC Charges Merrill Lynch and Parent Company for Failing to File Suspicious Activity Reports (Compliance Failure) – Fined $6M to Settle Charges with SEC and another $6M to FINRA
Washington, DC (STL.News) Compliance Failure – The Securities and Exchange Commission Tuesday announced charges against Merrill Lynch, Pierce, Fenner & Smith Incorporated (ML) and its parent company BAC North America Holding Co. (BACNAH) for failing to file hundreds of Suspicious Activity Reports (SARs) from 2009 to late 2019. ML agreed to pay a $6 million penalty to settle the SEC charges, and in a parallel action, Merrill Lynch agreed to pay a separate $6 million fine to settle charges brought by the Financial Industry Regulatory Authority (FINRA).
According to the SEC’s order, BACNAH assumed responsibility for creating and implementing ML’s SAR policies and procedures and for filing ML SARs. Over the course of a decade, however, BACNAH improperly used a $25,000 threshold instead of the required $5,000 threshold for reporting suspicious transactions or attempted transactions where a suspect may have been seeking to use Merrill Lynch to facilitate criminal activity and could not be identified. As a result, BACNAH caused Merrill Lynch’s failure to file hundreds of required SARs.
“Broker-dealers have a critical obligation to report suspicious activity in their accounts,” said Katharine E. Zoladz, Co-Acting Regional Director of the Los Angeles Regional Office. “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.”
The SEC’s order finds that ML violated the books and records provisions of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder and that BACNAH caused those violations. Without admitting or denying the SEC’s findings, Merrill Lynch and BACNAH agreed to cease and desist from committing or causing violations of those provisions, and ML also agreed to a censure and the aforementioned $6 million civil penalty.
The SEC’s investigation was conducted by staff at the Los Angeles Regional Office and supervised by Finola H. Manvelian. The SEC appreciates the assistance of FINRA.