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. Continue reading →