According to OnWallStreet magazine, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) slapped Merrill Lynch with massive fines for misusing client’s cash while failing to safeguard their securities, and for failing to disclose material facts to clients about structured notes products.
The major claim by the SEC was that Merrill artificially reduced required cash deposits in customer accounts to free up billions of dollars per week to finance its own trading activities. The SEC said that if any trade had collapsed, Merrill’s customers would have been exposed to massive shortfalls.
In addition, Merrill disregarded rules for years by holding up to $58bn per day of customer securities in clearing bank accounts that were not shielded from claims by third parties and subject to general liens.
Merrill admitted to the wrongdoing. The article can be found here.by