FINRA fines Merrill Lynch $1.05 million
FINRA fines Merrill Lynch $1.05 million over pricing information on order system
WASHINGTON (AP) -- The Financial Industry Regulatory Authority has ordered the broker Merrill Lynch, Pierce, Fenner & Smith Inc. to pay about $1.05 million for failure to provide customers with the best possible pricing information on certain transactions.
The industry watchdog said Tuesday that it found that Merrill Lynch had programmed faulty pricing logic into its order management system, ML BondMarket. The system only incorporated quotes published on the primary listing exchange for a certain non-convertible preferred security. As a result, when there was a better quote available beyond the primary listing exchange, that quote was not reflected.
Merrill Lynch executed 12,259 transactions in non-convertible preferred securities with its customers on ML BondMarket at prices that were inferior to the National Best Bid and Offer, according to FINRA.
FINRA said that in any customer transaction, a firm must use reasonable diligence to make sure the price to the customer is as favorable as possible. It also said that the company failed to have an adequate supervisory system and written supervisory procedures in place.
As a result, Merrill Lynch was fined $1 million and was ordered to pay more than $323,000 in restitution, plus interest, to customers who did not receive best execution for their trades in non-convertible preferred securities.
In addition, FINRA has required Merrill Lynch to revise its written supervisory procedures regarding ML BondMarket best execution obligations within 30 business days.
In concluding this settlement, Merrill Lynch neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Merrill Lynch is owned by Bank of America Corp., which is based in Charlotte, N.C.
Bank of America spokesman Bill Halldin said that the matter predated the bank's acquisition of Merrill Lynch and was caused by a processing issue that has been corrected. He said the company has compensated all affected clients.
Bank of America shares rose 20 cents, or 1.7 percent, to $12.18 in midday trading. Its shares have traded in a 52-week range of $6.72 last May to $12.94 last month.
