The U.S. Securities and Exchange Commission announced that Merrill Lynch
would pay $11 to settle charges regarding the use of inaccurate data for
the order of short sales.
Merrill Lynch entities admitted wrongdoing and will pay $11 million to settle SEC charges
that claimed the broker-dealer used incorrect data to order short sales.
The SEC explained that customers routinely ask broker-dealers like Merrill
Lynch to locate stock for short selling. In response, brokerage firms
provide easy-to-borrow or “ETB” lists with stocks the firm
has evaluated and determined fit the standard. The SEC claimed that certain
securities Merrill Lynch listed on the ETBs in the morning became no longer
easy-to-borrow by later in the day.
According to the SEC, the brokerage’s execution platform was not
programmed correctly to stop processing short sale orders based on data
from the ETBs. This allegedly resulted in the execution platforms not
using accurate data until the next day’s ETB list came out.
Brokerage firms are required to comply with short-selling obligations,
which includes evaluating accurate ETB lists. According to the SEC, around
the year 2012, Merrill Lynch was utilizing a faulty system that caused
their programs to use day-old data to build ETB lists. This means that
some securities were allegedly categorized as “easy to borrow”
when they should not have been.
When brokerage firms or their brokers fail to comply with securities industry
regulations, their customers can suffer financially. If you or someone
you know has lost money through investment fraud or misconduct of any
kind, we invite you to contact a securities fraud lawyer at Meyer Wilson
today for a
free case review.