Maybe Mother Merrill was a little too sweet for her own good.
Merrill Lynch, the brokerage firm long known for looking out for its own, on Tuesday paid $10 million to settle charges it fleeced customers to pad its own trading account.
Knocks over some china
The brokerage firm consented to a Securities and Exchange Commission censure over the actions of its proprietary trading desk between 2003 and 2005. The firm’s equity strategy desk improperly got wind of trades the firm’s institutional clients were making and placed the same trades for its own account, the SEC said.
Merrill, which was purchased by Bank of America (BAC) in 2009 after nearly collapsing during the financial crisis, also overcharged some institutional and rich customers without telling them, the SEC said. Merrill didn’t admit or deny the findings.
“Investors have the right to expect that their brokers won’t misuse their order information,” said Scott W. Friestad of the SEC’s Division of Enforcement. “The conduct here was clearly inappropriate. Merrill’s proprietary traders had improper access to information about the firm’s customer orders, and misused it to place trades on the firm’s behalf.”
That’s not the only legal news swirling around the banks Tuesday. A group of institutional investors sued BofA’s other meltdown-era acquisition, Countrywide, on Tuesday, claiming it engaged in “massive” mortgage fraud by providing false documents in securities offerings. BofA shares fell 3%*.
But other banks are in the cross hairs as well, with a filing in another case claiming JPMorgan Chase (JPM) was aware of problems with the loans backing mortgage securities trusts but failed to rectify them. JPMorgan fell 1% and Citi (C) and Wells Fargo (WFC) each slipped 2%.
The flurry of bad news comes just a day after BofA began promoting its latest effort to attract individual investing dollars via a trading and advice platform known as Merrill Edge. Individual investors largely weren’t affected by the SEC charges announced Tuesday, but they will surely sleep easier knowing they aren’t the source of Merrill’s trading edge.
*Correction 2:59 p.m.: Earlier I wrote the stock hit a 52-week low. At a recent $13.40 it is about $2.50 above its 52-week low. My regrets.
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