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.
Two 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.