Merrill Lynch, Pierce, Fenner & Smith, a subsidiary of Bank of America, has agreed to pay the Securities and Exchange Commission (SEC) more than $15m to resolve charges of misleading clients into overpaying for residential mortgage backed securities (RMBS).
The settlement includes a penalty of around $5.2m and over $10.5m in disgorgement and interest to affected customers.
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The regulator alleged that the company’s traders and salespeople concealed the price it paid to acquire the securities, as well as made gains from excessive commissions known as mark-ups.
In some instances, the mark-ups were more than twice the amount customers should have paid, SEC said.
Merrill Lynch was also accused of lacking adequate surveillance procedures to detect the wrongdoings.
SEC enforcement division complex financial instruments unit chief Daniel Michael said: “In opaque RMBS markets, lying to customers about the acquisition price can deprive investors of important information.
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By GlobalData“The Commission found that Merrill Lynch failed in its obligation to supervise traders who allegedly used their access to market information to take advantage of the bank’s own customers.”
Merrill Lynch agreed to the settlement without admitting or denying the allegations.
“We have addressed issues raised in this matter, which occurred between 2009 and 2012, and taken steps to improve our procedures,” Merrill Lynch stated.
