Merrill Lynch fined over rogue broker

Massachusetts securities' regulators fine the brokerage giant $500,000 for failing to stop a rep from defrauding clients

Oct 31, 2013 @ 12:20 pm

By Trevor Hunnicutt

Merrill Lynch was fined $500,000 by Massachusetts securities regulators for failing to stop a rogue broker from defrauding clients.

Merrill Lynch Pierce Fenner & Smith Inc. failed to notice patterns of behavior by a financial adviser that suggested she was in financial trouble, regulators said Thursday.

Federal prosecutors and regulators said the adviser, Jane E. O'Brien, who has since resigned, borrowed more than $2 million of clients' money, and in one case used money a client intended to invest in a software company for her own personal expenses.

Ms. O'Brien had been a top producer for Merrill's Boston office, bringing in nearly $154 million in client assets and earning $903,734 in revenue for the firm in her first year, regulators said.

“By the time she was questioned about her financial withdrawals, she had already borrowed money from her clients,” a violation of the law, William F. Galvin, the Massachusetts secretary of the commonwealth, said in a statement. Mr. Galvin's office oversees the commonwealth's securities regulators.

“This in my estimation is yet another example of top producers often being held to a different standard because of the revenue they bring into the firm.”

Merrill agreed to the $500,000 fine for its “failure to supervise” but did not admit to violating the law.

“When we became aware of the matter two years ago, and began investigating, the financial adviser resigned,” said Bill Haldin, a spokesman for Merrill's parent company, Bank of America Corp. “We will be reaching out to affected clients to address any remaining issues.”

Ms. O'Brien prematurely removed $380,750 from her own retirement account at Merrill Lynch, and regulators said those withdrawals, which incurred tax penalties, might have been a sign to the company that she was in financial trouble. But Merrill did not inform Massachusetts securities regulators about reviewing her conduct until six days after she was indicted by the Justice Department, the regulators said.

Ms. O'Brien pleaded guilty to fraud last year and has been barred from the securities industry. In May, she was sentenced to 33 months in federal prison and ordered to pay $240,000 in restitution.

In a separate action, Massachusetts fined another firm, Sentinel Securities Inc., $50,000 for failing to supervise an operations manager who has been accused of shifting funds from the firm's accounts to his own, according to the statement.

0
Comments

What do you think?

View comments

Most watched

Events

Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.

Events

Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Latest news & opinion

10 IBDs with the most annuity revenue

Here are the independent broker-dealers that brought in the most annuity revenue last year.

LPL expanding platform to include employee brokers

The largest IBD in the country has agreed to buy a small broker-dealer in Florida to kick off the new effort.

Hopes high for bill to ease small-firm adviser regulations

High-ranking, bipartisan members of the House Financial Services Committee back the legislation.

Redtail CRM data breach exposes personal client data

The information exposed includes names, addresses, dates of birth and Social Security numbers.

This strategy can double your estate-tax exemption

'Portability' allows a surviving spouse to tack the decedent's exemption on to his or her own. Despite the higher threshold for paying estate taxes in the 2017 tax law, experts recommend filing for the benefit.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print