Defendant Name:
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Defendant Type:
Subsidiary of Public Company
Public Company Parent:
Bank of America Corporation
SIC Code:
6021
CUSIP:
06050510
Document Reference:
33-10103
Document Details
Legal Case Name
In the Matter of Merrill Lynch Pierce, Fenner & Smith Incorporated
Document Name
Order Instituting Cease and Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings and Imposing a Cease and Desist Order
Document Date
23-Jun-2016
Document Format
Administrative Proceeding
Allegation Type
Securities Offering
Document Summary
On June 23, 2016, the SEC instituted settled cease-and-desist proceedings against Merrill Lynch, Pierce, Fenner & Smith Incorporated ('Merrill Lynch'). According to the SEC: "These proceedings involve Merrill Lynch's failure to adequately disclose certain fixed costs in a proprietary volatility index linked to structured notes known as Strategic Return Notes ('SRNs') of Bank of America Corporation ('BAC'). Merrill Lynch offered and sold approximately $150 million of these volatility notes to approximately 4,000 retail investor accounts in 2010 and 2011. The disclosures made it appear as if the volatility product had relatively low fixed costs. The offering materials emphasized that investors would be subject to a 2% sales commission and a 0.75% annual fee. The offering materials failed to adequately disclose a third fixed, regularly occurring cost included in its proprietary volatility index known as the 'Execution Factor' (distinct from 'holding' or 'decay' costs associated with daily calculation of the underlying index which are variable and depend upon market conditions). As a result, the disclosures in the offering materials of the fixed costs associated with the SRNs were materially misleading."
Disgorgement & Penalty Information
Resolutions
Cease and Desist Order
Monetary Penalties:
Civil Penalty
Individual:
$10,000,000.00
Shared: