Finra fines Merrill $3m over neglectful trade monitoring (2024)

Compliance Aug 30, 2024

The regulatory authority said the wirehouse relied on poorly designed third-party automated surveillance platforms to check for issues.

By Alec Rich

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Merrill Lynch has agreed to pay a $3m fine handed down by the Financial Industry Regulatory Authority (Finra) for failing to properly surveil for potentially manipulative trading practices over much of the last decade.

Finra said in a settlement released Wednesday that beginning in December 2015, Merrill, and later, Bank of America Securities (BofAS), relied on several third-party automated surveillances to check its platforms that were ‘deficient.’ As a result, the firm was limited in its ability to monitor for possible wash trading and prearranged trading. Merrill agreed to the settlement without admitting or denying Finra’s findings.

Finra contended that issues were only flagged if very specific sequences played out, such as when potentially manipulative prearranged trades were made simultaneously or reversed back to the original account, when there are other ways for prearranged trading to occur. At the same time, Finra said Merrill did not take reasonable steps to see whether the narrow monitoring parameters it had in place were sufficient or if changes needed to be made over time.

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Finra fines Merrill $3m over neglectful trade monitoring (2024)

The regulatory authority said the wirehouse relied on poorly designed third-party automated surveillance platforms to check for issues.

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