Merrill Lynch to Pay SEC $3.8 Million Over Third-Party Adviser's Investments

By Dean Seal

Broker-dealer Merrill Lynch will pay $3.8 million to resolve the government's allegations that a third-party adviser invested more of its clients' money than they had specified, resulting in higher fees and losses.

The U.S. Securities and Exchange Commission said Wednesday that from March 2016 to April 2018, Merrill failed to tell certain clients that Harvest Volatility Management had used an options strategy that materially exceeded the investment exposure levels those clients had designated.

The Bank of America unit knew or should have known that those clients' investment levels were higher than specified, causing the clients to pay higher fees, be subject to higher market exposure and ultimately incur losses, the SEC claims.

Without admitting or denying the allegations, Merrill Lynch has agreed to settle the matter with a $1 million fine and the disgorgement of $2 million that Harvest paid Merrill from clients' management fees. The broker-dealer will also pay $800,000 in prejudgment interest.

The SEC said Harvest had also agreed to a settlement, in which it will pay a $2 million fine and $3.5 million in disgorgement and interest.

Write to Dean Seal at dean.seal@wsj.com

Corrections & Amplifications

This article was corrected at 10:38 a.m. ET to show that Merrill Lynch will pay $800,000 in prejudgment interest in its settlement with the SEC. The original version incorrectly said Merrill would pay $8,000 in prejudgment interest.

(END) Dow Jones Newswires

September 25, 2024 10:03 ET (14:03 GMT)

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