Merrill Lynch & Co. has agreed to pay $26.5 million in a national settlement stemming from Texas' claims that the brokerage allowed sales assistants to sell securities without being properly registered, said State Securities Commissioner Denise Voigt Crawford.
The Bank of America Corp. unit came under investigation from Texas after receiving a tip from a former Merrill employee in May 2008.
Ronak Patel, an attorney with the State Securities Board's inspections and compliance division, said, "The tip alleged that Merrill Lynch saved money on registration fees because their client associates only registered in two states — the associate's home state and one neighboring state." Such employees act as sales assistants and administrative support personnel for Merrill Lynch's financial advisers.
The board claimed that "Client associates also accepted trade orders from clients, a practice that requires registration both in the client associate's home state and in the client's state." It called Merrill's supervisory system "not reasonably designed to ensure that its client associates complied with registration requirements."
A Merrill spokesman was not immediately available to comment, but Texas said the company has instituted new supervisory controls.
Texas and the other six states that made up the task force looking at Merrill suspect other financial services firms have similar registration issues, Crawford said. — Dow Jones