The Securities and Exchange Commission charged Merrill Lynch with misusing customer order information to make its own proprietary trades, the agency said Tuesday.
The infractions occurred between 2003 and 2005 on the company's proprietary equity strategy desk, which traded for the firm's benefit and had nothing to do with executing customer orders. Merrill's trading desk was located on its main equity trading floor in New York, where market makers received and executed customer orders.
The SEC says Merrill's equity strategy traders had access to institutional customer orders and used it to place trades on Merrill's behalf after the customer trades were made. The agency says this misuse of information was contrary to Merrill's claim to customers that their orders would be maintained on a strict need-to-know basis.
The SEC also found that between 2002 and 2007, Merrill charged certain institutional and high-net-worth customers undisclosed mark-ups and mark-downs different from pre-existing commission agreements with those customers.
Without admitting or denying the SEC's charges, Merrill agreed to pay a $10 million fine and consented to a cease-and-desist order.