Massachusetts Securities Regulators Fine Merrill Lynch $500,000 For Alleged Failure to Stop Rogue Broker

Merrill Lynch Pierce Fenner & Smith Inc. (MER) must now pay Massachusetts securities regulators a fine for allegedly failing to supervise a broker who went on to defraud customers. According to regulators and prosecutors, when she was with Merrill, now ex-broker Jane E. O’Brien borrowed over $2 million of clients’ funds. She pleaded guilty to fraud charges last year and is barred from the securities industry.

O’Brien received a thirty-three month prison term and was told to pay restitution of $240,000. She was the top producer at the firm’s Boston office, where she brought in close to $154 million in client assets and earned $903,734 in revenue during her first year with Merrill. Massachusetts Secretary of the Commonwealth William Galvin, whose office oversees the regulators there, said that this was another example of top producers “being held to a different standard” because of the money they make for their firms.

Although Merrill agreed to pay the “failure to supervise” fine, it has not admitted to violating any laws. A firm spokesperson says that as soon as they knew there might be a problem, an internal investigation was conducted and O’Brien resigned.

In one instance, she is accused of using money that a client was going to invest in a company to cover her own personal expenses. Regulators say that O’Brien’s early withdrawal of $380,750 from her retirement account at the firm should have been an indicator she was having money problems. Instead, Merrill did not tell regulators about the misconduct until after the Justice Department indicted her.

Our Massachusetts securities lawyers handle broker fraud cases in which a financial adviser’s behavior caused an investor to sustain financial losses. We also handle securities fraud lawsuits involving inadequate supervision. Firms are supposed to properly oversee their representatives so that misconduct and avoidable mistakes don’t happen. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Merrill Lynch fined over rogue broker, Investment News, October 31, 2013

Former Merrill Lynch financial advisor faces securities fraud charge, Boston.com, November 20, 2012

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