SEC Orders Merrill Lynch to Pay $9.7 Million For Failing to Disclose Foreign Exchange Fees
From the desk of Jim Eccleston at 蘑菇传媒
The Securities and Exchange Commission (SEC) has ordered Merrill Lynch to pay $9.7 million for failing to disclose certain foreign exchange fees charged to clients for currency conversions.
Merrill Lynch offered clients a wrap-fee program that charged a fee based on assets under management, which covered services including foreign currency exchanges because accounts could only be held in U.S. dollars. Clients also were required to pay a markup or markdown on the exchanges under the wrap-fee program. However, the SEC alleged that Merrill regularly charged an undisclosed production fee in addition to the markup between 2016 and 2020. The so-called production fee was not covered by the wrap fee and was equal to or greater than the markup in 80% of transactions, according to the SEC.
Merrill charged $4,134,610 in undisclosed production fees on at least 15,000 separate foreign currency exchanges in approximately 4.874 client accounts, according to the SEC. The SEC further alleged that Merrill siphoned a portion of the production fees to its financial advisors and classified the charge as a commission on internal documents. While Merrill did not admit or deny any of FINRA’s investigatory findings, the company agreed to pay $4,134,610 in disgorgement and $760,104 in prejudgment interest as well as a civil penalty of $4.8 million.
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