Merrill Brokers Accused of Steering Facebook IPO Shares to Pals
(Bloomberg) -- Merrill Lynch brokers were accused of making sure their friends and relatives got shares from some of the hottest IPOs, including Facebook Inc. and Twitter Inc., in alleged misconduct that regulators said went on for years.
Bank of America Corp.’s Merrill unit agreed to pay about $6 million to settle Financial Industry Regulatory Authority claims that employees improperly sold stock to immediate family members and brokers at other firms. Merrill made at least 1,462 prohibited sales in 325 different initial public offerings from 2010 through March of this year, including those of Facebook, Twitter, General Motors Co. and LinkedIn Corp., Finra said in a Thursday statement.
“IPO shares sold to industry insiders are unavailable to investors who might otherwise have purchased them,” Susan Schroeder, an executive vice president in Finra’s enforcement department, said in the statement. “Merrill Lynch knew or should have known that these customers were restricted from IPO purchases, but repeatedly sold them shares in violation of Finra rules.”
The brokerage regulator blamed Merrill for lacking supervisory systems that could have prevented the misconduct. At least 120 different financial advisers located in 79 of the firm’s branch offices were involved in the prohibited stock sales, Finra said. Merrill agreed to resolve the case without admitting or denying wrongdoing.
“We have enhanced our policies and procedures to properly identify clients who are ineligible to receive IPO shares and to prevent similar conduct in the future,” Bill Halldin, a Merrill spokesman, said in an emailed statement.
©2018 Bloomberg L.P.