FINRA Investigation: Merrill Lynch & Alleged Cold Calling Violations

Merrill Lynch Reportedly Pauses Cold Calling in Training Program

According to Advisor Hub this week, the Financial Industry Regulatory Authority is investigating possible cold calling violations at Merrill Lynch Wealth Management’s advisor training program.

The article states that in July 2020 Merrill Lynch reportedly halted outbound calls in the 43-month Financial Advisor Development training program due to its discovery of numerous do-not-call violations by the broker trainees. The wirehouse previously retained a consulting firm to conduct a third-party audit of any violations and help update policies and procedures around telemarketing, according to the article, sourcing a manager at the firm.

The management source also reportedly said that while cold calling has seen a large decline throughout the industry in the past decade, Merrill Lynch reportedly revived the practice in 2019 as part of its “activity-based acquisition” client growth strategy in the training program. The firm reportedly set targets for its salaried trainees to make dozens of “contacts” or connections to live people each week and log them in its customer relationship management system, according to Advisor Hub’s management source.

The challenge of monitoring those calls was compounded during the pandemic as trainees could not rely on face-to-face interactions to build their businesses, according to the article.

Advisor Hub says while cold calling remains paused in the training program, it’s not clear if the FINRA action would result in a settlement or not. Nor is it clear whether FINRA’s investigation was prompted by customer complaints or those U5 filings or was self-reported.

According to FTC rules, do-not-call list issues may be subject to fines of up to $43,280 per violation, and each call may be considered a separate violation, according to the article.

FINRA Rule 3230 imposes restrictions on telephone calls by broker dealers and their registered representatives to “induce the purchase of goods or services or to solicit charitable contributions,” subject to some exceptions set forth in the Rule. Specifically, unless an exception is available, 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.”

Merrill Lynch reportedly paid $400,000 in 2014 in a settlement with The New Hampshire Bureau of Securities Regulation over charges that brokers violated internal and FTC do-not-call lists when contacting customers in the state.

For more information see, 3 Merrill Lynch Brokers Reportedly Fired for Cold Calling.

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