Merrill Lynch is paying $1.4 million in fines and costs over thousands of cold calls its trainees made to numbers on do-not-call lists between 2018 and 2020.
In two separate consent orders recently signed with Finra and the New Hampshire Bureau of Securities Regulation, the firm agreed to pay each entity $700,000, with most of the sums being fines for the self-reported instances of cold calling.
“Merrill Lynch failed to establish and maintain a supervisory system reasonably designed to ensure that trainees did not place unsolicited telemarketing calls to individuals on the national do-not-call registry and the firm's do-not-call list,” the Financial Industry Regulatory Authority Inc. stated in its consent order signed on Monday.
The firm did not admit nor deny the findings but consented to their entries by Finra and New Hampshire. However, Merrill noted that it voluntarily contacted Finra about the infractions.
“When we were notified of issues involving financial advisor trainees, we conducted an internal review, reported our conclusions to Finra, and enhanced our supervision and training,” a company spokesperson said in an email.
In 2021, Merrill indicated that it had moved away from the tradition of having advisor trainees cold-call prospects, instead focusing on drumming up business via social media or through the relationship with Bank of America.
Prior to that, including the period during which trainees dialed forbidden numbers, Merrill had a firmwide policy of not calling numbers on the National Do Not Call Registry, as well as the company’s own list of those who opted out of telemarketing.
However, Merrill’s oversight was lacking. In its monthly telemarketing compliance reviews of 200 randomly chosen trainees, it didn't consider numbers that trainees called but didn't log as being prospective clients within its content management system, according to the recently signed orders.
Merrill became aware of the lapse when a former employee brought it up in 2019. The following year, the company “implemented enhanced call screening and supervisory review technology, adopted enhanced supervisory procedures, conducted enhanced training and began monitoring all outgoing trainee calls for compliance with Rule 3230,” Finra noted.
There were roughly 3,000 trainees in the 36-month training program at any given time, according to the records.
The National Do Not Call Registry, which started in 2003, includes more than 246 million numbers. New Hampshire has the highest rate of registration, with about 1.3 million residents having signed up, according to the state.
“The Bureau acknowledges that Merrill Lynch, prior to any enforcement action by the New Hampshire Bureau of Securities Regulation, made sweeping substantive compliance changes to its policies and procedures with regard to telemarketing policies,” the state’s order read.
The actions follow a separate consent order Merrill reached with New Hampshire in 2014 over telemarketing calls to residents on the do-not-call registry, which included $400,000 in fines and costs.
Following the earlier agreement with New Hampshire, Merrill made changes to its policies to prevent the issue, including telemarketing rules for its advisor trainees, according to the order.
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