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Merrill to pay $26.5 million to settle sales probe
By Pzf-ajc-jmz
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(September 21, 2009 - Monday) - Texas will receive $1.6 million in the settlement with Merrill Lynch, Pierce, Fenner & Smith Inc. The Texas State Securities Board led a task force that investigated the broker's "failure to supervise its client associates," Commissioner Denise Voight Crawford said in a Tuesday release.
The amount that other states will receive wasn't disclosed in the Sept. 4 consent order.
The probe followed a tip from a Merrill employee made in May 2008, before the broker was bought by Bank of America. The tip said the company saved registration fees by having client associates register in just two states, their home state and one neighboring state.
Since client associates accept trade orders, they should be registered in the client's state as well as their home state. The Texas investigation found that Merrill's supervisory system "was not reasonably designed to ensure that its client associates complied with registration requirements."
Besides Texas, the multi-state task force included Colorado, Arizona, Missouri, Vermont, New Hampshire and Delaware. Crawford said the task force members suspect similar registration issues may exist at other financial services firms.
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