Oriental Financial Services - Law Offices of Robert Wayne Pearce

Dec 1, 2016

Merrill Lynch Hit with $7 Million Fine for Failing to Supervise Securities-Backed Leveraged Accounts

The Financial Industry Regulatory Authority (FINRA) has hit Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) with a fine of more than $7 million for failing to properly supervise its customers’ use of leverage in loan management accounts and for improper supervision regarding unsuitable and highly overconcentrated accounts invested in Puerto Rican municipal bonds and closed-end bond funds. Without admitting or denying the charges, Merrill Lynch consented to FINRA’s findings that it failed to adequately educate its representatives about its loan management accounts (LMAs) or train them on the differences between purpose and non-purpose LMAs. LMAs are lines of credit that enable customers to borrow money from, in this case, Bank of America (the owner of Merrill Lynch) using the securities in their accounts as collateral. FINRA notes that Merrill Lynch brokers earned compensation if the customers used the line of credit. Merrill Lynch must pay $6.25 million for its failure to supervise these LMAs.

Feb 26, 2015

FINRA Fines Oriental Financial Services for Failing to Supervise Puerto Rico Bond Fund Investments

Oriental Financial Services Corp. (Oriental) was fined $245,000 by the Financial Industry Regulatory Authority (FINRA) for failing to maintain a proper supervisory system to comply with Federal securities laws, namely, that its supervisory system failed to identify and review concentrated purchases of Puerto Rico municipal bonds and closed-end funds; and failing to disclose on customer confirmations the markups and markdowns for riskless principal transactions in Puerto Rico closed-end funds. Without admitting or denying the findings, Oriental consented to FINRA’s sanctions and findings that if failed to disclose approximately $2.9 million in markups and markdowns on customer trade confirmations. According to FINRA, Oriental’s registered representatives continued selling the municipal bonds and closed-end funds even after the municipal bond rating had been downgraded to junk status. Consequently, Oriental Financial Services has agreed to submit to FINRA the procedure of how it intends to properly identify, review and correct any unsuitable, concentrated Puerto Rico bond purchases.