Merrill Lynch Pays $10 Million to End SEC Claims It Misused Client Orders

More handslapping.  Make billions, get fined millions.  Fraud as a  
business model.

regards,
-Lance
----------------
http://www.bloomberg.com/news/2011-01-25/sec-sues-merrill-lynch-for-misusing-customer-order-information.html

Merrill Lynch Pays $10 Million to End SEC Claims It Misused Client  
Orders
By Hugh Son - Jan 25, 2011 12:49 PM CT

Bank of American Corp.’s Merrill Lynch unit agreed to pay $10 million  
to settle U.S. regulatory claims that it misused clients’ securities  
orders to make trades with the firm’s own money.
The firm overcharged some institutional and wealthy customers on  
trades between 2002 and 2007, the U.S. Securities and Exchange  
Commission said today in a statement. In those instances, Merrill  
filled customer orders at prices less favorable than what the firm  
obtained, the SEC said.

“The conduct here was clearly inappropriate,” Scott Friestad, the SEC  
attorney who oversaw its case, said in the statement. “Investors have  
the right to expect that their brokers won’t misuse their order  
information.”

The settlement clears a hurdle for Bank of America Chief Executive  
Officer Brian T. Moynihan as he completes what he called the “final  
touches” of the integration of Merrill Lynch, purchased in January  
2009. Merrill sought a takeover from the Charlotte, North Carolina- 
based lender after mortgage bond losses forced the securities firm to  
the brink of collapse in late 2008.

Merrill operated a proprietary trading desk from 2003 to 2005 in New  
York where market makers executed customer orders, the SEC said. While  
Merrill told clients their order information was used on a need-to- 
know basis, proprietary traders used the data to place trades on  
Merrill’s behalf after the institutional trades were placed, according  
to the statement.

‘Hard to Imagine’

“These kinds of practices were probably pretty widespread in the  
industry,” said Phillip Phan, professor at the Johns Hopkins Carey  
Business School in Baltimore. “Merrill probably won’t be punished  
overly by the market -- and I find it hard to imagine institutions  
were completely naïve about this.”

The company didn’t admit or deny wrongdoing in agreeing to settle the  
SEC’s civil complaint.

“Merrill Lynch adopted a number of policy changes to ensure separation  
of proprietary and other trading and to address the SEC’s concerns,”  
said Bill Halldin, a spokesman for Bank of America. “Merrill Lynch  
also voluntarily implemented enhanced training and supervision to  
improve the principal trading processes at the firm.”

The company’s global banking and markets division, run by former  
Goldman Sachs Group Inc. trading head Thomas Montag, earned $6.3  
billion last year, helping prop up the bank’s unprofitable mortgage  
and credit-card operations. Montag was hired by then-Merrill Lynch CEO  
John Thain in 2008.

Last week, Bank of America reported a $1.24 billion fourth- quarter  
loss, its second consecutive unprofitable period, as the lender  
boosted provisions tied to faulty loans and litigation and wrote down  
the value of its mortgage unit.
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