SEC Merrill Advisory Conflicts

On Aug. 20, SEC $8.9mn Merrill settlement on advisor conflicts.

  • Firm will pay $8.9mn for failed to disclose conflict of interest from own business.
  • In deciding if to continue to offer clients product managed by third-party advisor.

Alleged Violations

  • Conflict arose in handling third-party products of US subsidiary of a foreign bank.
  • Over 1,500 of Merrill’s retail advisory accounts had invested $575mn in products.
  • Merrill put new investments on hold, due to a management change at third party.
  • Governance committee planned to vote on recommendation to terminate product.
  • Third-party manager sought to stop ban, and contacted senior Merrill executives.
  • Via making an appeal to consider their companies’ broader business relationship.
  • After communication, governance committee did not vote and deferred its action
  • Committee later lifted hold and opened third-party products to new firm accounts.
  • Failed to disclose to clients, conflicts of interest in firm’s decision-making process.


  • Merrill agreed to pay over $4mn disgorgement, $806k interest and $4mn penalty.