The Securities and Exchange Commission announced charges against Merrill Lynch, Pierce, Fenner & Smith Incorporated and its parent company BAC North America Holding Co. for failing to file hundreds of suspicious activity reports from 2009 to late 2019.
In connection, the Financial Industry Regulatory Authority fined Merrill Lynch, Pierce, Fenner & Smith Inc. $6 million for the same reported failure.
Merrill Lynch agreed to pay a $6 million penalty to settle the SEC charges, and a separate $6 million fine to settle charges brought by FINRA.
According to the SEC’s order, BAC assumed responsibility for creating and implementing Merrill Lynch’s SAR policies and procedures and for filing Merrill Lynch’s 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 approximately 1,500 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 Merrill Lynch violated the books and records provisions of the SEC. Without admitting or denying the SEC and FINRA’s findings, Merrill Lynch and BACNAH agreed to cease and desist from committing or causing violations of the SEC’s provisions, and Merrill Lynch also agreed to a censure by the SEC and to pay $12 million in fines and penalty.
“Law enforcement and regulators depend on FINRA member firms to properly report potential fraud and other suspicious activities,” said Christopher J. Kelly, senior vice president and acting head of FINRA’s Department of Enforcement. “It is therefore essential that member firms comply with their SAR filing obligations. Merrill Lynch failed in this basic responsibility.”