The Securities and Exchange Commission (SEC) has brought charges against Merrill Lynch, Pierce, Fenner & Smith Incorporated, and its parent company BAC North America Holding Co. (BACNAH) due to their failure to file multiple Suspicious Activity Reports (SARs) between 2009 and late 2019. As part of the settlement, Merrill Lynch has agreed to pay a $6 million penalty to the SEC. Furthermore, in a related action, Merrill Lynch will pay an additional $6 million fine to resolve charges brought by the Financial Industry Regulatory Authority (FINRA).

According to the SEC’s findings, BACNAH was responsible for devising and implementing Merrill Lynch’s SAR policies and was tasked with filing the SARs on behalf of Merrill Lynch. However, over a ten-year period, BACNAH erroneously used a $25,000 threshold instead of the mandatory $5,000 threshold for reporting suspicious transactions or attempted transactions related to potential criminal activity through Merrill Lynch that could not be identified. This oversight led to Merrill Lynch’s failure to submit hundreds of required SARs.

Katharine E. Zoladz, Co-Acting Regional Director of the Los Angeles Regional Office, stressed the crucial duty of broker-dealers to report suspicious activity in their accounts. She commented, “Merrill Lynch and BACNAH neglected to file hundreds of Merrill Lynch SARs by failing to adhere to one of the most fundamental requirements of a SAR program.”

The SEC’s order concludes that Merrill Lynch violated the books and records provisions of Section 17(a) of the Securities Exchange Act of 1934, along with Rule 17a-8, and holds BACNAH accountable for these violations. Without admitting or denying the SEC’s findings, Merrill Lynch and BACNAH have agreed to cease and desist from further violations of these provisions. Merrill Lynch will also receive a censure and pay the $6 million civil penalty.

The SEC’s investigation was carried out by the staff at the Los Angeles Regional Office under the supervision of Finola H. Manvelian. The SEC acknowledges the cooperation and assistance provided by FINRA during the course of this investigation.