The SEC has charged Merrill Lynch with misleading customers on mortgage bond prices and overcharging for trades to increase profits.
Mortgage Bond Fraud
The Securities and Exchange Commission (SEC) has ordered Merrill Lynch to pay $15.7 million to settle allegations of securities fraud. According to an SEC investigation, Merrill Lynch traders and salespeople overcharged customers for residential mortgage bond trades between 2009 and 2012. Merrill Lynch RMBS traders lied to bank customers about the actual price they paid for the securities, according to the SEC. Since mortgage bond pricing is not public information and bonds are not publicly traded on an exchange, customers were easily duped by broker-dealers who negotiated the bond transactions.
The SEC investigation revealed that Merrill Lynch RMBS traders lied to customers about mortgage bonds prices and increased the prices to raise their profits on the trades. By deceiving customers with misleading statements and undisclosed, excessive markups on mortgage bond trades, Merrill Lynch acted recklessly according to the SEC. The SEC further alleged that Merrill Lynch RMBS traders charged some customers twice the amount they should have paid. Although Merrill Lynch had policies in place that prohibited traders from making false or misleading statements, they failed to implement the procedures and monitor traders’ communications with customers according to the investigation.
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The SEC investigation found that Merrill Lynch failed to properly supervise RMBS traders. By doing so, they allowed brokers to participate in mortgage bond trades that violated anti-fraud federal securities laws. As part of the settlement agreement, Merrill Lynch has been ordered to pay more than $10.5 million to customers and a fine of $5.2 million to the SEC for illegal securities fraud actions. Merrill Lynch agreed to the settlement without admitting or denying SEC allegations and issued a statement that they have taken steps to improve in-house procedures to prevent repeated actions.
Stockbrokers and financial advisors have a duty to recommend investments that are appropriate based on their clients’ specific circumstances. Unfortunately, many investors are deceived by unethical brokers who put their profits above their clients’ best interests. When an investor suffers financial losses due to fraud and investment misconduct, a claim can be filed through an investment fraud attorney. In most cases, claims against brokers are handled through FINRA arbitration.
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Every case is different but investors who have been cheated out of their investments due to illegal, fraudulent broker actions can recover damages, which may include their investment principal, expected gains if money had been invested appropriately, arbitration costs, attorney’s fees, and punitive damages if egregious misconduct was involved. If you lost money because of broker misconduct, call our investment fraud attorneys at Meyer Wilson today at (614) 532-4576 to schedule a free consultation.
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Recovering Losses Caused by Investment Misconduct.