The Financial Industry Regulatory Authority has censured and fined Merrill Lynch, Pierce, Fenner & Smith Inc. $500,000 for supervisory failures that allegedly allowed widespread deficiencies in the filing of hundreds of reports.
The violations, which Finra clams went undetected for several years, may have hampered investors' ability to assess the background of certain brokers via BrokerCheck, Finra's public disclosure program, the authority announced today.
In reaching a settlement with Finra, Merrill Lynch neither admitted nor denied the charges, but consented to the entry of Finra's findings.
Under Finra rules, when a securities firm hires a broker, it must ensure that information on the broker's registration application (Form U4) is updated and kept current on the Central Registration Depository (CRD) system.
Under Finra's rules, firms are required to update that information whenever reportable events occur, including regulatory actions against the broker, specific customer complaints, settlements involving the broker, and felony charges and convictions. Normally, those updates must be filed within 30 days of the event. Firms are also required to notify Finra within 30 days of the termination of a registered person's association with a member firm by filing a notice known as a U5 form. Firms also must notify Finra within 30 days of learning that information disclosed on a U5 has become inaccurate or is incomplete.
"Firms that fail to file important regulatory information in a timely manner can compromise the integrity of CRD and BrokerCheck," said Brad Bennett, executive vice president and chief of enforcement for Finra in a prepared statement. "In this instance, Merrill Lynch failed to report critical information that regulators and investors rely upon."
Finra is an independent regulator for all securities firms doing business in the U.S.