WASHINGTON (Legal Newsline) — Merrill Lynch will pay $415
million after allegations it misused customer cash to generate profits and
failed to protect customer securities from the claims of its creditors, the
Securities and Exchange Commission (SEC) has announced.
The SEC charged Merrill Lynch with violating the agency’s
Customer Protection Rule. The company allegedly conducted complex options
trades that lacked economic substance and artificially reduced requisite
customer reserve account deposits. Merrill Lynch’s purported actions freed up
billions of dollars it could then use to finance its own trading activities.
“The rules concerning the safety of customer cash and
securities are fundamental protections for investors and impose lines that
simply can never be crossed,” said Andrew J. Ceresney, director of the SEC’s
Division of Enforcement. “Merrill
Lynch violated these rules, including during the heart of the financial crisis,
and the significant relief imposed today reflects the severity of its
In addition to violating the Customer Protection Act,
Merrill Lynch allegedly violated Exchange Act Rule 21F-17. Jeff Leasure and
James Murtha handled the case for the SEC with help from Eli Bass and Michael
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U.S. Securities and Exchange Commission
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Washington, DC 20001
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