Settlement of $60 Million in Civil Penalties

By Chris Prentice

(Reuters) – Merrill Lynch and two Wells Fargo advisory firms have agreed to pay a combined $60 million in civil penalties to settle U.S. Securities and Exchange Commission (SEC) charges over compliance failures, the SEC announced on Friday.

According to the SEC, Wells Fargo and Merrill Lynch failed to adopt and implement adequate policies and procedures that considered the best interests of their clients regarding their cash sweep programs. This lapse resulted in violations of securities laws and rules.

The firms offered bank deposit sweep programs as the sole cash option for most clients, benefiting financially while neglecting to act in their clients’ best interests, according to the SEC’s statement.

Wells Fargo and Merrill Lynch did not admit or deny the SEC’s findings.

A Wells Fargo spokesperson, whose firm agreed to pay $35 million across its two advisory firms, stated, “Our agreement with the SEC puts this broader industry matter behind us,” and noted that the firm has already addressed the issues.

Meanwhile, Bank of America, which owns Merrill Lynch, stated that the firm had taken “significant steps” to resolve the issue before learning of the SEC’s investigation. The spokesperson also mentioned that Merrill Lynch was one of the largest providers of notably higher cash sweep rates for advisory clients’ uninvested cash. Merrill Lynch agreed to pay a $25 million fine as part of the SEC settlement.