The Financial Industry Regulatory Authority (FINRA) has hit Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) with a fine of more than $7 million for failing to properly supervise its customers’ use of leverage in loan management accounts and for improper supervision regarding unsuitable and highly overconcentrated accounts invested in Puerto Rican municipal bonds and closed-end bond funds.
Without admitting or denying the charges, Merrill Lynch consented to FINRA’s findings that it failed to adequately educate its representatives about its loan management accounts (LMAs) or train them on the differences between purpose and non-purpose LMAs. LMAs are lines of credit that enable customers to borrow money from, in this case, Bank of America (the owner of Merrill Lynch) using the securities in their accounts as collateral. FINRA notes that Merrill Lynch brokers earned compensation if the customers used the line of credit. Merrill Lynch must pay $6.25 million for its failure to supervise these LMAs.
FINRA also found that Merrill Lynch failed to establish and maintain a proper supervisory system and written supervisory procedures with respect to the suitability of transactions involving Puerto Rican securities, such as municipal bonds and closed-end bond funds. FINRA found that leveraged customers with modest net worth and conservative investment goals contained 75% or more of their assets in Puerto Rican securities. These particular customers suffered losses of nearly $1.2 million due to the liquidating of those Puerto Rican securities to meet margin calls. Merrill Lynch must pay approximately $780,000 in restitution to the affected customers.
Robert Wayne Pearce, P.A. understands the complexity of loan management accounts and Puerto Rico bond funds and knows that your investment monies are at stake when brokers make unsuitable recommendations, over-concentrate your investment in a particular geographic area, and/or when brokerage firms fail to supervise their employees. If you have found yourself with an investment account over-concentrated in Puerto Rico municipal bonds and/or closed-end bond funds, or if you borrowed monies from Bank of America (Merrill Lynch), Santander Securities, Oriental Financial Services, Popular Securities, or UBS Puerto Rico and used your investments as collateral for those loans, we may be able to help you recover your losses.
Mr. Pearce has won arbitrations for our clients against UBS Puerto Rico and currently represents many other clients with cases involving Puerto Rican securities against brokerage firms such as UBS, Santander Securities, Popular Securities, Oriental Financial Services, and Merrill Lynch. One arbitration award can be found here, and our most recent award can be found here. Attorney Pearce has also successfully negotiated numerous settlements for other clients of ours who have retained our firm in hopes of recovering their Puerto Rico bond investment losses.
Have you suffered losses in an unsuitable or over-concentrated investment in Puerto Rican securities? Did your Merrill Lynch broker recommend an investment or a loan management account that was not in line with your conservative investment goals? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. We have associated with an attorney in Puerto Rico, Lcdo. Julio Cayere Quidgley, who will meet with you to discuss your case at no charge. Mr. Pearce and Mr. Cayere are currently representing numerous clients with claims against UBS Puerto Rico, Santander Securities, Popular Securities, Merrill Lynch and Oriental Financial Services for misrepresentations, overconcentration and/or unsuitable recommendations of UBS Puerto Rico closed end bond funds to conservative investors.
For dedicated representation by a law firm with over 35 years of experience in all kinds of securities, commodities and investment disputes, contact us by telephone at 561-338-0037 or toll free at 800-732-2889, via e-mail or visit our website at www.secatty.com We may also be able to arrange a meeting with you at offices located in San Juan, Puerto Rico or in Boca Raton, Fort Lauderdale, Miami and West Palm Beach, Florida and elsewhere.