Merrill to pay $1.4 million over telemarketing violations

Merrill to pay $1.4 million over telemarketing violations
The company, which self-reported the issue, signed separate consent orders with Finra and the New Hampshire Bureau of Securities Regulation.
MAY 04, 2023

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.

Stock valuations may be high but opportunities abound

Latest News

RIA moves: True North adds $353M California RIA as SageView grows North Carolina presence
RIA moves: True North adds $353M California RIA as SageView grows North Carolina presence

Plus, a $400 million Commonwealth team departs to launch an independent family-run RIA in the East Bay area.

Blue Owl Capital, Voya strike private market partnership for retirement plans
Blue Owl Capital, Voya strike private market partnership for retirement plans

The collaboration will focus initially on strategies within collective investment trusts in DC plans, with plans to expand to other retirement-focused private investment solutions.

Top Commonwealth advisor to recruiters: Stop with the cold calls already!
Top Commonwealth advisor to recruiters: Stop with the cold calls already!

“I respectfully request that all recruiters for other BDs discontinue their efforts to contact me," writes Thomas Bartholomew.

Why AI notetakers alone can't fix 'broken' advisor meetings
Why AI notetakers alone can't fix 'broken' advisor meetings

Wealth tech veteran Aaron Klein speaks out against the "misery" of client meetings, why advisors' communication skills don't always help, and AI's potential to make bad meetings "100 times better."

Morgan Stanley, Goldman, Wells Fargo to settle Archegos trades lawsuit
Morgan Stanley, Goldman, Wells Fargo to settle Archegos trades lawsuit

The proposed $120 million settlement would close the book on a legal challenge alleging the Wall Street banks failed to disclose crucial conflicts of interest to investors.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.