Merrill Lynch Joins Growing B-D List Banning Bitcoin Trading By Brokers, Clients

Merrill Lynch has banned its financial advisors and clients from trading in Bitcoin, a Merrill Lynch spokeswoman has confirmed.

Merrill Lynch has banned its roughly 17,000 advisors not only from pitching cryptocurrency investments, but also from executing client trade requests in the over-the-counter Grayscale Investment Trust Bitcoin fund, which was first reported by The Wall Street Journal. The ban includes the Merrill Lunch Investment Advisory Program, any legacy programs and dual-contract programs, a Merrill Lynch spokeswoman said.

Merrill Lynch customers with self-directed accounts are also banned from buying positions in the Grayscale Investment Trust Bitcoin fund, due to “concerns pertaining to suitability and eligibility standards,” the wirehouse said in a memo first obtained by the WSJ.

The ban has been in place since Dec. 8, prior to the launch of Bitcoin futures, Merrill Lynch confirmed. The prohibition extends an earlier policy barring trades in newly launched bitcoin futures.

Bitcoin, which was trading at close to $20,000 in December, nosedived to $15,000 as of Wednesday.

Merrill Lynch is still allowing brokerage accounts to hold positions in Bitcoin, but not fee-based accounts.

In other words, the firm does not believe the investments will withstand regulatory or legal challenges, a former SEC attorney, who asked for anonymity, told Financial Advisor magazine. “There is no way Bitcoin meets the fiduciary smell test. It would be indefensible. These products are much more speculation than investments and definitely not investments that meet any fee-based portfolio parameters Merrill or any firm I know of have in place,” the attorney said.

Cryptocurrencies, initial coin offerings and their other derivatives violate b-ds’ written risk policies, the lawyer added.

The Merrill Lynch ban extends an existing policy barring access to all newly launched bitcoin futures that was put in place last fall.

While some brokers have complained the ban stops them from meeting investors’ demand for Bitcoin investments, more prudent brokers and investment advisors say the ban tracks their own aversion to the wildly speculative products.