BofA's Merrill Lynch to Pay $8.9M to Settle Regulatory Claim
Bank of America Corporation’s BAC unit Merrill Lynch has agreed to pay nearly $8.9 million to settle charges claimed by a U.S. regulator. The charges relate to the unit failing to disclose a conflict of interest with a third-party product provider, according to the Securities and Exchange Commission.
Per the SEC, BofA’s brokerage unit exploited accounts of nearly 1,500 investors, who had about $575 million invested in products managed by the subsidiary of a foreign advisory firm.
The SEC claimed that Merrill Lynch tried to stop these investors from making new investments in products of the third party because of some pending management changes at the foreign bank.
In fact, Merrill Lynch’s governance committee was planning to vote in favor of a recommendation of terminating the third-party products in order to offer alternative investment options to these investors.
Notably, the SEC claimed that the foreign bank made an appeal to Merrill Lynch’s senior executives, asking to prevent the governance committee’s vote, leading to the decision of offering the third party’s products to the new Merrill Lynch accounts.
Marc Berger, director of the SEC’s New York regional office said, “By failing to disclose its own business interests in deciding whether certain products should remain available to investment advisory clients, Merrill Lynch deprived its clients of unbiased financial advice.”
Without accepting or denying the SEC’s claims, Merrill Lynch agreed to settle the charges and stated, “We promptly enhanced our policies and procedures to ensure the confidentiality of recommendations in the future.”
Though BofA has resolved quite a many litigation issues, it still faces investigations from several federal agencies and a few foreign governments for its business conducts in the pre-crisis period. These legal issues might lead to higher expenses in the future, which might weigh marginally on the company’s bottom-line growth.
Shares of BofA have gained 29.6% in the past year, outperforming the industry’s growth of 15.6%.
The stock currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the finance space worth considering are mentioned below. Each of them currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Ameriprise Financial, Inc.’s AMP Zacks Consensus Estimate for the current year has been revised nearly 1.7% upward in the past 60 days. Its shares have gained 1.7% in the past 12 months.
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