Home / Business and Economy / Merrill Fined Again for Supervisory Failures
Merrill Fined Again for Supervisory Failures
20 Jun
Summary
- Merrill Lynch fined $175,000 for disclosure failures.
- Firm failed to notify clients about municipal securities taxation.
- This is the second FINRA censure for supervision issues.
Merrill Lynch, Pierce, Fenner & Smith Incorporated was recently censured and fined $175,000 by FINRA. The financial regulator found that the firm failed to provide essential time-of-trade disclosures to self-directed clients concerning municipal securities purchased at a market discount. This lapse occurred over a period spanning from January 2021 to September 2023.
During this timeframe, Merrill executed 4,181 municipal purchases, valued at approximately $87 million, across 1,072 self-directed accounts. The firm neglected to flag the non-de minimis market discount. Consequently, clients were not informed that the accreted discount would be subject to ordinary income tax rates instead of the more favorable capital gains rate.
FINRA's findings emphasized a significant failure in supervision. Merrill reportedly had no written procedures to guarantee disclosures reached its self-directed platform, nor a process to verify their delivery. This breach of MSRB Rules G-47 and G-27 led to the censure. The firm has since issued the missing disclosures and is offering remediation to affected clients.
