Merrill fined $2.5 million for supervision violations in Massachusetts

Training session did not include discussion of fiduciary requirements when commission-based assets are moved to fee-based accounts

Secretary of the Commonwealth of Massachusetts William Galvin fined Merrill Lynch $2.5 million for supervisory violations in connection with a training presentation in 2013.
Mr. Galvin, whose office oversees securities regulation in the state, said that during the presentation, Merrill financial advisers were being trained in how to double their production by, among other things, transferring existing customer assets from commission-based brokerage accounts to fiduciary fee-based alternatives.
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Mr. Galvin’s order states that this part of the presentation “did not include language regarding client suitability or the fiduciary requirements of Merrill Lynch financial advisers.”
“Financial advisers may have been encouraged to move their clients’ assets based on their own financial interest rather than their clients’ best interest,” Mr. Galvin said in a news release.
Mr. Galvin noted that the presentation, which was attended by more than 300 Merrill staff in Boston, including financial advisers, was not reviewed ahead of time by Merrill compliance personnel, in violation of the firm’s policy.
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“Compliance rules and procedures are essential to the integrity of the marketplace, but they are rendered meaningless unless they are rigidly adhered to and address all possible interpretation or misinterpretation by the intended audience,” he said.
“We are reiterating to our employees the need to have internal presentations properly approved before their use,” said William Halldin, Merrill Lynch spokesman. “Importantly, as the state notes, this was not a matter involving any conduct that disadvantaged our clients.”