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MERRILL LYNCH FINED $1 MILLION FOR FAILING TO SUPERVISE A BROKER WHO OPERATED A PONZI SCHEME

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In October 2011, The Financial Industry Regulatory Authority (formerly known as the National Association of Securities Dealers) fined Merrill Lynch $1 million for failing to adequately monitor the activities of broker Bruce Hammonds, who worked out of a Merrill Lynch branch office in San Antonio.

According to the press release issue by FINRA:

You would think that, given all of the complaints that have been filed against Merrill Lynch over the past five or so years, they would at least be careful about making sure that they could monitor every investor’s account.  But apparently that was not the case.  One of the remarkable aspects of Merill Lynch’s conduct is the ease in which its computer system was compromised.  This wasn’t some detailed plan of the kind you see in The Ocean 11 movie and its sequel.  This was simple stuff.  If a Merrill  Lynch employee didn’t use their own social security number as the accounts primary tax ID, the account wasn’t in the relevant database, and Merill Lynch couldn’t monitor what was going on in that account.

Mr. Hammonds was caught, but it does make you wonder what was going on in the other 40,000 accounts that, for at least some period of time, remained unsupervised.

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