Finra Bars Fired Merrill Lynch Broker Accused of Falsifying Class B Mutual Fund Share Sales Orders

The Financial Industry Regulatory Authority (Finra) has permanently barred fired Merrill Lynch broker Bhenoy (Ben) Dembla. According to InvestmentNews, The former broker was let go from the financial firm in 2016 for “falsifying documents” related to mutual fund sales.

Dembla, who worked for Merrill the entire time he was a broker from 2001 to 2016, is accused of submitting fake sell orders to get around the firm ’s electronic order system protections. The protections should have stopped the submission of Class B share purchase orders once these had exceeded the accumulation limit.

According to FINRA, Dembla would submit the bogus sell orders, which the system would accept, and then he would cancel the orders. All of this made it possible for certain customers to go over Class B share thresholds with their purchases.

The self-regulatory organization (SRO) said that from 12/2015 through 4/2016, Dembla made and then canceled over 40 fictitious sell orders so as to execute 29 Class B share purchases. This led to 18 customers’ accounts going over the accumulation limit by $863K. Finra also accused Dembla of submitting false entries for why customers were seeking to sell the funds.

The SRO had previously issued an investor alert cautioning against buying Class B mutual fund shares when it might have been more cost-effective for them to purchase a different mutual fund share class. The regulator advised investors to make sure that buying the Class B mutual fund shares was in their best interest and not just in the best interest of their broker or financial adviser, in part because of the high fees associated with this particular share class.

While Class B shares don’t typically charge an upfront load, brokers and broker-dealers are usually paid ongoing 12b-1 fees from them. These type of shares also may charge higher sales fees than other fund share classes.

Merrill Lynch has since paid customers that were affected nearly $32K in restitution. According to Dembla’s BrokerCheck records, four customer disputes naming him have been settled, including one alleging excessive trading and unsuitable investments, which was settled for $95K. Three investor fraud cases claiming unsuitable investment recommendations were settled for $167K, $110K, and $200K, respectively.

Our mutual fund law firm works with customers throughout the US in helping them to recover losses sustained from broker fraud, broker negligence, and other wrongdoing. Contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) today.