The Securities and Exchange Commission (SEC) has announced charges against Merrill Lynch, Pierce, Fenner & Smith Inc. and its parent company, BAC North America Holding Co. (BACNAH) for failing to file hundreds of Suspicious Activity Reports (SARs) between 2009 and 2019.
“Broker-dealers have a critical obligation to report suspicious activity in their accounts,” Katharine E. Zoladz, Co-Acting Regional Director of the Los Angeles Regional Office, said in a release by the SEC. “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.”
As part of the SEC probe, Merrill Lynch has agreed to pay a $6 million penalty to settle the SEC charges and an additional $6 million fine in a parallel action brought by the Financial Industry Regulatory Authority (FINRA), the release added.
According to the SEC's findings, BACNAH was responsible for developing and implementing SAR policies and procedures for Merrill Lynch and filing the reports. However, the SEC investigation revealed that BACNAH used an incorrect threshold of $25,000 instead of the required $5,000 for reporting suspicious transactions or attempted transactions where a suspect could have used the company to facilitate criminal activity. Accordingly, Merrill Lynch didn't file numerous SARs as required, the SEC reported.
The SEC said Merrill Lynch violated the books and records provisions of the Securities Exchange Act of 1934, and that BACNAH caused the 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 Merrill Lynch also agreed to an SEC censure and agreed to pay the $6 million civil penalty.
The SEC's investigation was conducted by the Los Angeles Regional Office and supervised by Finola H. Manvelian, with help from FINRA, the SEC reported.
