After a lengthy investigation that began in 2009 into Merrill Lynch, Pierce, Fenner & Smith's self-identified failure to make timely regulatory filings, FINRA announced Monday it censured and fined Merrill Lynch $500,000 for failing to take proper supervisory measures, a deficiency that FINRA claims lead to widespread violative conduct in the firm's failure to file approximately 1,200 required documents, including customer complaints, arbitration claims and broker registration and termination records.
When a customer makes a complaint, files an arbitration claim or enters into a settlement with a firm and when a new broker is hired or a current broker leaves the firm, FINRA requires firms to file various forms and reports. Examples of required filings are the broker registration application (Form U4) and the termination of a registered person's association with a FINRA-member firm (Form U5). All of this data is stored in FINRA'S "Central Registration Depository" or "CRD." Selected pieces data from the CRD is made available to the public via FINRA's BrokerCheck.
In its investigation, FINRA found that between 2005 and 2011, of the 1,200 required filings that were not executed, at least 650 were required reports that included nearly 300 customer complaints and settlements, while 300 more were non-NASD/FINRA arbitration and civil or criminal complaints.
The findings state that during this time period, Merrill Lynch failed to failed to file complaints no more than 63 percent of the time, while it failed to amend Forms U4 and U5 related to non-NASD/FINRA actions up to 79 percent of the time. FINRA claims the firm's failure to adequately train and supervise personnel in charge of complaint tracking and reporting contributed to this "widespread" failure.
FINRA relies on accurate firm reporting in order to maintain its CRD database as well as BrokerCheck In regards to the data Merrill Lynch failed to report and its impact on BrokerCheck, FINRA Executive Vice President and Chief of Enforcement Brad Bennett stated: "Without timely and accurate reporting by firms, investors only have part of the picture when researching and making decisions about their brokers."
Because Merrill Lynch was found to have not reported adequately, accurately or timely, the BrokerCheck system may not have always maintained accurate records for Merrill Lynch and its associated brokers for the period from 2005 through 2011.
According to FINRA'S findings, this failure to maintain accurate records may have hampered FINRA and its member firms' ability to adequately review and research Merrill Lynch and its brokers, such as compromising "firms' ability to conduct background checks when making hiring decisions."
As part of the terms of its settlement, Merrill Lynch consented to the entry of FINRA's findings without admitting nor denying the aforementioned charges.
If you have invested with Merrill Lynch, Pierce, Fenner & Smith or a former Merrill Lynch broker and believe inaccuracies regarding the firm's BrokerCheck record or Merrill Lynch's failure to file has contributed to actions that have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.