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A broker-dealer agreed to pay approximately $8.9 million to settle SEC charges for failing to disclose a conflict of interest that affected approximately 1,500 of the broker-dealer's retail advisory accounts.
According to the SEC Order, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") failed to disclose a conflict of interest that influenced a decision as to whether it would continue offering products managed by a third-party advisory firm to certain clients. According to the SEC, the third-party manager learned that Merrill Lynch's governance committee intended to vote on terminating certain products. To prevent the termination, the third-party manager allegedly reached out to senior Merrill Lynch executives in an undisclosed communication that included an appeal to consider the companies' broader business relationships. Thereafter, the governance committee decided to break from standard practice and defer the proposed termination. Later, the governance committee decided to remove the hold and make the products available to new accounts. The SEC Order concluded that Merrill Lynch's failure to inform its advisory clients or the entirety of its governance committee of the conflict of interest in its own decision making process violated provisions of the Investment Advisers Act of 1940.
Merrill Lynch neither admitted to nor denied the SEC's findings.
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