The Securities and Exchange Commission (SEC) has outlined charges against entities for allegedly failing to file hundreds of Suspicious Activity Reports (SARs) from 2009 to late 2019.
The SEC noted the charges were against Merrill Lynch, Pierce, Fenner & Smith Incorporated and its parent company BAC North America Holding Co. (BACNAH), noting Merrill Lynch agreed to pay a $6 million penalty to settle the SEC charges and, in a parallel action, Merrill Lynch agreed to pay a separate $6 million fine to settle charges brought by the Financial Industry Regulatory Authority (FINRA).
Per the SEC’s order, BACNAH allegedly assumed responsibility for creating and implementing Merrill Lynch’s SAR policies and procedures and for filing Merrill Lynch’s SARs. Over the course of a decade BACNAH allegedly improperly used a $25,000 threshold instead of the required $5,000 threshold for reporting suspicious transactions or attempted transactions where a suspect may have been seeking to use Merrill Lynch to facilitate criminal activity and could not be identified.
“Broker-dealers have a critical obligation to report suspicious activity in their accounts,” SEC Los Angeles Regional Office Co-Acting Regional Director Katharine E. Zoladz said. “Merrill Lynch and BACNAH did not file hundreds of Merrill Lynch SARs because they failed to comply with one of the most basic requirements for a SAR program.”
The SEC alleged Merrill Lynch violated the books and records provisions of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder and BACNAH allegedly caused those violations.
Without admitting or denying the SEC’s findings, Merrill Lynch and BACNAH agreed to cease and desist from committing or causing violations of those provisions, and Merrill Lynch also agreed to a censure and the aforementioned $6 million civil penalty.