Finra hits Merrill for $450K over structured products sales

SRO claims brokerage did not have automated system to flag potential risk for clients

Jun 14, 2012 @ 4:56 pm

By Dan Jamieson

Merrill Lynch this week agreed to pay a $450,000 fine and accept a censure in a case involving supervision of structured-product sales.

In a settlement agreement dated Monday, the Financial Industry Regulatory Authority Inc. claims that from 2006 through March 2009, Merrill did not have an automated compliance reporting system to flag potentially unsuitable concentrations of structured products in customer accounts.

Merrill relies on such automated reports in its oversight system.

During the time period at issue, Finra said the firm's customers made 650,000 purchases of structured products. More than half of the products were issued by Merrill's parent company.

Because structured products are unsecured debt obligations of the issuing firm, customers face an "issuer risk," Finra said, which "underscores the importance of ensuring that customers invest only an appropriate amount of their assets in such products."

In a statement included with settlement, Merrill said it began developing an automated concentration report in late 2008, and implemented the system in March 2009.

Bill Halldin, a Merrill spokesman, declined further comment.

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