Merrill Lynch pays $42M to settle SEC charges

The Securities and Exchange Commission has announced it has charged Merrill Lynch with misleading customers about how it handled their orders. Merrill Lynch has agreed to settle the charges, admit wrongdoing, and pay a $42 million penalty.

According to the SEC’s order, Merrill Lynch falsely informed customers that it had executed millions of orders internally when it actually had routed them for execution at other broker-dealers, including proprietary trading firms and wholesale market makers. Merrill Lynch called this practice “masking.” Masking entailed reprogramming Merrill Lynch’s systems to falsely report execution venues, altering records and reports, and providing misleading responses to customer inquiries. By masking the broker-dealers who had executed customers’ orders, Merrill Lynch made itself appear to be a more active trading center and reduced access fees it typically paid to exchanges.