NASD Fines Merrill $5 Million in Settlement Over Improper Supervision Charges
Merrill Lynch agreed today to pay a $5 million NASD fine to settle charges that the firm’s brokerage client call centers were out of control.
The firm’s Financial Advisory Center (FAC), with locations in Hopewell, N.J., and Jacksonville, Fla., was found to have lacked sufficient supervisory measures that led to a variety of improprieties committed by brokers at the two locations between 2001 and 2004. (For background on call centers at Merrill and other firms, click here.)
James Shorris, acting head of NASD enforcement, chastised the firm, saying regardless of account size, all clients are entitled to service in their best interests from reps that are reasonably supervised. Said Norris: “In this case, Merrill Lynch failed to meet these basic standards by permitting its call center to function without proper supervisory controls, which gave rise to impermissible sales contests, unsuitable mutual fund switches and other systematic failures.”
Merrill neither admitted nor denied the charges, and, in a statement provided by the firm, it said the problems have long since been fixed: “We have acknowledged that we had growing pains in Merrill Lynch’s Financial Advisory Center four and five years ago when it expanded. We are confident we’ve worked them out, made significant changes to our operations and management and offer a service that 90 percent of our FAC clients tell us leaves them ‘highly satisfied.’ ”
The FAC caters to clients holding accounts with less than $100,000. In 2000 as Merrill Lynch ramped up its efforts to increase operational efficiency and profitability by focusing branch office brokers on wealthier clients, the center grew. According to the NASD, more than one million clients were transferred to the FAC between March 2001 and August 2002. At its peak size in 2002, the FAC held approximately 1.3 million accounts with assets totaling nearly $20 billion and gross revenue of $210 million.
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