📋 Tender Overview
The Securities and Exchange Commission charged Merrill Lynch Pierce Fenner Smith Incorporated for charging advisory clients more than 4 million in undisclosed foreign exchange fees for transfers to or from their accounts. To settle the charges Merrill Lynch has agreed to pay disgorgement prejudgment interest and a civil penalty totaling more than 9.5 million and has agreed to distribute funds to harmed clients.The SECs order finds that between May 2016 and July 2020 Merrill Lynch offered programs to advisory clients in which the clients paid Merrill a fee in exchange for a range of investment advisory services including foreign currency exchanges. In the programs client agreements and brochures Merrill Lynch disclosed that it charged a markup or markdown on foreign currency exchanges but it did not disclose an additional fee it referred to as a production credit which in more than 80 percent of the transactions was equal to or greater than the disclosed markup or markdown. Merrill Lynch paid a percentage of these production credits to its financial advisors and referred to this charge as a commission in internal documents. The SECs order also finds that Merrill Lynch failed to adopt and implement policies and procedures reasonably designed to prevent its disclosures from being misleading about the fees it charged on foreign currency exchanges.Investment advisers must ensure that they do not selectively disclose some fees but not others relating to a particular service said Antonia M. Apps Director of the SECs New York Regional Office. While Merrill Lynch disclosed the markups or markdowns charged on foreign currency exchanges thousands of clients were left in the dark as to an often larger fee charged on these transactions and were charged millions of dollars in undisclosed fees.Merrill Lynch consented to the entry of the SECs order finding that it violated Sections 2062 and 2064 of the Investment Advisers Act of 1940 and related rules. Without admitting or denying the SECs findings Merrill Lynch agreed to a cease-and-desist order a censure and to pay disgorgement of approximately 4.1 million prejudgment interest thereon of 760000 and a civil penalty of 4.8 million. Merrill Lynch agreed to distribute funds to harmed advisory clients.The SECs investigation was conducted by Brian Kudon Elizabeth Baier and Sandeep Satwalekar of the New York Regional Office and was supervised by Thomas P. Smith Jr.
