Two Securities Regulators Fine Merrill Lynch $1.4 Million for Cold Calling Violations
According to Investment News on May 4, 2023, Merrill Lynch has agreed to pay $1.4 million for inappropriate cold calling by its trainees between 2018 and 2020.
Merrill Lynch, who self-reported the issue, reportedly signed separate consent orders with the Financial Industry Regulatory Authority (FINRA) and the New Hampshire Bureau of Securities Regulation.
The firm agreed to pay each agency $700,000, for fines for the self-reported instances of cold calling.
Merrill Lynch allegedly failed to establish and maintain a supervisory system reasonably designed to ensure that trainees did not place unsolicited telemarketing calls to individuals on the national do-not-call registry and the firm’s do-not-call list, according to FINRA’s findings in a Letter of Acceptance Waiver and Consent.
Although Merrill had a firmwide policy of not calling numbers on the National Do Not Call Registry, as well as the company’s own list of those who opted out of telemarketing, its supervisory system was lacking.
In its monthly telemarketing compliance reviews of 200 randomly chosen trainees, it didn’t consider numbers that trainees called but didn’t log as being prospective clients within its content management system, according to the regulators. There were approximately 3,000 trainees in the 36-month training programs, according to the article.
Merrill reportedly implemented enhanced call screening and supervisory review technology, adopted enhanced supervisory procedures, conducted enhanced training and began monitoring all outgoing trainee calls for compliance with Rule 3230 after the oversight came to light in 2019, according to FINRA. To learn more see:
FINRA Rule 3230
FINRA Rule 3230 imposes restrictions on telephone calls by members and their associated persons to induce the purchase of goods or services or to solicit charitable contributions, subject to some exceptions set forth in the Rule.
Specifically, Rule 3230 prohibits members and their associated persons from initiating any “outbound telephone call” during restricted periods of time or to individuals on the “firm-specific do-not-call list” or the “national do-not-call list.”
In 2021, Merrill indicated that it had moved away from the tradition of having advisor trainees cold-call prospects, instead focusing on drumming up business via social media or through the relationship with Bank of America.
This is not the first time that Merrill has been sanctioned by New Hampshire over telemarketing calls. In 2014 the firm also paid $400,000 for telemarketing calls to residents on the do-not-call registry.
Merrill Lynch reportedly made changes to its policies to prevent the issue, including telemarketing rules for its advisor trainees after the sanctions in 2014, according to the order.
Failure to Supervise – Merrill Lynch
The FINRA supervision rule (FINRA Rule 3110) helps to ensure that firms have effective supervisory systems in place to protect investors and maintain the integrity of the securities markets.
FINRA Rule 3110 is designed to protect investors by requiring firms to establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA rules. This helps to ensure that the firm and its associated persons conduct business in an ethical and compliant manner, reducing the risk of harm to investors.
The rule requires firms to designate one or more qualified individuals to be responsible for supervising the activities of the firm and its associated persons. These individuals are responsible for ensuring that the firm’s supervisory procedures are effective in detecting and preventing violations of securities laws and regulations.
Firms must also review and monitor customer account activity to detect and prevent potential violations and conduct periodic inspections of the firm’s offices and other locations where business is conducted.
National Securities Attorneys – the White Law Group
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
With over 30 years of securities law experience, the White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses.
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Tags: cold calling, failure to supervise, FINRA Rule 3230, Merrill Lynch, New Hampshire Bureau of Securities Last modified: May 8, 2023
