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Merrill Lynch is Accused by the SEC of Failing to Inform Clients of Foreign Exchange Fees

July 10, 2023 Broker Complaints

The Securities and Exchange Commission has filed a complaint against Merrill Lynch, Pierce, Fenner & Smith Integrated for allegedly charging advising clients more than $4 million in hidden foreign currency charges for transactions to or from their accounts. 

Merrill Lynch has agreed to repay restitution, interest on prejudicial claims, and a civil penalty involving more than $9.5 million to resolve the allegations. He has also committed to disbursing money to harm clients.

According to the SEC’s order, Merrill Lynch marketed programs to advising customers between May 2016 and July 2020. Customers paid Merrill an expense as compensation for various financial advice offerings, including foreign currency conversions.

Merrill Lynch stated that it applied an increase in price or markdown to currency exchanges in the program’s client commitments and brochures. Still, it omitted to mention an additional fee known as a manufacturing credit, which is more than 80% of the transactions was equal to or higher than the revealed markup or markdown. 

In confidential papers, Merrill Lynch described the payment it made to its financial consultants as a commission and distributed a portion of these credits for production to them. In addition, Merrill Lynch violated the SEC’s order for failing to create and put into practice rules and practices that were logically intended to avoid misrepresentation in its statements on the fees it assessed for currency exchanges.

Antonia M. Apps, Director of the SEC’s New York Regional Office, stated that investment advisors must make sure that they do not arbitrarily reveal some fees but not others pertaining to a specific service. 

While Merrill Lynch stated the markups or markdowns charged on foreign exchanges, many clients were unaware of a frequently higher cost levied on these sorts of transactions and were charged millions of dollars in undeclared fees.

Merrill Lynch gave its permission for the SEC’s ruling, which found that the company had broken the Investment Advisors Act of 1940’s Sections 206(2) and 206(4) and associated laws, to be put into effect. 

Merrill Lynch complied with an order to cease and desist, a censure, and agreed to pay an administrative penalty of $4.8 million, prejudgment interest of $760,000 on the disgorgement of about $4.1 million, and a disgorgement of that amount of about $4.1 million. Merrill Lynch did this without acknowledging or disputing the SEC’s allegations. Merrill Lynch consented to provide money to advising clients who had suffered damage.

Sandeep Satwalekar, Elizabeth Baier, and Brian Kudon of the SEC’s New York Division carried out the investigation under Thomas P. Smith Jr.’s direction.

This article was originally posted on – U.S. Securities and Exchange Commission ( | SEC Charges Merrill Lynch for Failing to Disclose Foreign Exchange Fees to Clients)

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