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Merrill Lynch to Pay $8.9 Million to SEC for Failing to Disclose Conflict of Interest

The SEC censured Merrill Lynch and ordered the firm pay $8.9 million in fines, disgorgment and penalties after finding the firm violated the Advisers Act by failing to disclose a key conflict of interest to investors, thus engaging in activity "which operates as a fraud or deceit upon any client or prospective client."

According to the SEC's cease-and-desist order, Merrill Lynch failed to disclose a conflict of interest related to a 2013 decision that exposed over 1,500 retail advisory accounts to certain unnamed products that generated $4.03 million for the firm in fees from clients invested in the products.

The findings state that in 2012, the due diligence wing of Merrill Lynch's Global Wealth & Retirement Solutions unit recommended terminating specific products from the firm's investment platform. Following this recommendation, Merrill Lynch's governance committee purportedly voted to reinstate the products after putting new investments on hold from January to December 2013.

Investigators found that the products were affiliated with a bank with which Merrill Lynch conducted other business, thus representing a conflict of interest.

According to the report, Merrill Lynch did not tell its clients about this conflict of interest and collected its $4.03 million in fees in 2013 without making this disclosure.

The SEC said that in failing to disclose the conflict of interest, Merrill Lynch deprived its clients of unbiased financial advice.

Conflict-of-interest situations arise when a broker, adviser, or firm recommends a product that the broker/firm has a financial incentive in transacting, often at the expense of the investor's own financial well-being. Some unsuitable conflicts of interest recommendations manifest in higher fees and commissions that benefit the firm at the client's cost, and some conflicts of interest decisions simply are meant to steer investors toward a particular product that is controlled or affiliated with the person who recommended the investment.

If you have invested with a representative or firm in a product that was unsuitable or financially harmful to you and the unsuitable recommendation to invest in this product came as the result of an undisclosed or omitted conflict or interest, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

The Law Offices of Jonathan W. Evans & Associates - California Securities Fraud Attorney
Located at 12711 Ventura Boulevard, Suite #440 Studio City, CA 91604. View Map
Phone: (800) 699-1881 | Local Phone: (818) 760-9880.