The Securities & Exchange Commission today announced charges against Merrill Lynch, Pierce, Fenner & Smith Incorporated & its parent company BAC North America Holding Co. (BACNAH) for failing to file hundreds of Suspicious Activity Reports (SARs) from 2009 to late 2019. Merrill Lynch agreed to pay a $6 million penalty to settle the SEC charges &, in a parallel action, Merrill Lynch agreed to pay a separate $6 million fine to settle charges brought by the Financial Industry Regulatory Authority (FINRA).
According to the SEC’s order, BACNAH assumed responsibility for creating & implementing Merrill Lynch’s SAR policies & procedures & for filing Merrill Lynch’s SARs. Over the course of a decade, however, BACNAH improperly used a $25,000 threshold instead of the required $5,000 threshold for reporting suspicious transactions or attempted transactions where a suspect may have been seeking to use Merrill Lynch to facilitate criminal activity & could not be identified. As a result, BACNAH caused Merrill Lynch’s failure to file hundreds of required SARs.
“Broker-dealers have a critical obligation to report suspicious activity in their accounts,” said Katharine E. Zoladz, Co-Acting Regional Director of the Los Angeles Regional Office. “Merrill Lynch & BACNAH did not file hundreds of Merrill Lynch SARs because they failed to comply with one of the most basic requirements for a SAR program.”
The SEC’s order finds that Merrill Lynch violated the books & records provisions of Section 17(a) of the Securities Exchange Act of 1934 & Rule 17a-8 thereunder & that BACNAH caused those violations. Without admitting or denying the SEC’s findings, Merrill Lynch & BACNAH agreed to cease & desist from committing or causing violations of those provisions, & Merrill Lynch also agreed to a censure & the aforementioned $6 million civil penalty.
The SEC’s investigation was conducted by staff at the Los Angeles Regional Office & supervised by Finola H. Manvelian. The SEC appreciates the assistance of FINRA.