The Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch $6 million for Regulation SHO (Reg SHO) violations and failures to supervise. According to FINRA’s announcement on October 27, 2014, it censured and fined Merrill Lynch Professional Clearing Corp. (Merrill Lynch PRO) $3.5 million for violating Reg SHO, which is an SEC rule governing short sales and aimed at preventing abusive naked short selling. Additionally, FINRA also censured and fined Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) $2.5 million for inadequate supervisory practices.
According to FINRA, from September 2008 through July 2012, Merrill Lynch PRO failed to take action to close out certain fail-to-deliver positions, as required under Reg SHO. Further, Merrill Lynch PRO did not have appropriate systems and procedures in place to address the Reg SHO close-out requirements during most of the time period. Continue Reading