The Massachusetts Securities Division fined Merrill Lynch Pierce Fenner & Smith Inc. $500,000, alleging the firm failed to stop a broker from "borrowing" over $2 million of client funds—nearly $3 million according to FINRA—using at least a partial amount for her own personal expenses.
According to the state, Merrill Lynch's failure to supervise financial adviser Jane E. O'Brien began when O'Brien removed $380,750 from her own retirement account at the firm, incurring tax penalties and suggesting that she was in financial trouble.
Merrill Lynch admitted it "became aware of the matter" two years ago, but did not reach out to clients until the Massachusetts sanction in October, allowing by its own admission nearly 24 months to transpire from the first red flag to the firm's attempt to reach out to clients.
By the time Merrill Lynch began its review in earnest, it was too late—O'Brien pleaded guilty to fraud last year and was already barred from the securities industry and association with FINRA members in March.
Merrill Lynch additionally did not inform Massachusetts regulators about the O'Brien review until six days after she was indicted by the Justice Department and allegedly allowed over 11 months to transpire from O'Brien's criminal conviction to an attempt to contact affected clients.
As a condition of her 33-month prison sentence, effective May 30, 2013, O'Brien was ordered to pay $240,000 in restitution for private placement fraud perpetrated against an elderly customer.
Although the US District Court in Boston found that O'Brien failed to pay back a majority of $1.7 million in loans from the elderly client, she was not ordered to forfeit funds beyond the fraudulently gained $240,000.
Our firm has successfully represented and continues to represent individuals who have been tricked into "loaning" money to their brokers or suffered out-right theft. The brokerage firm often will refuse to make right with its clients without the involvement of regulators or the arbitration process. If you invested with Merrill Lynch, Jane E. O'Brien, a rogue broker or firm whose failure to supervise, intervene or stop the fraudulent actions of an employee has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
News: Merrill Lynch fined over rogue broker (Investment News)