Tag: Merrill Lynch

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Release: Merrill Lynch Commodities Inc. Enters into Corporate Resolution and Agrees to Pay $25 Million in Connection with Deceptive Trading Practices Executed on U.S. Commodities Markets

Release

Merrill Lynch Commodities Inc. Enters into Corporate Resolution and Agrees to Pay $25 Million in Connection with Deceptive Trading Practices Executed on U.S. Commodities Markets

DOJ, 25 June 2019

Merrill Lynch Commodities Inc. (MLCI), a global commodities trading business, has agreed to pay $25 million to resolve the government’s investigation into a multi-year scheme by MLCI precious metals traders to mislead the market for precious metals futures contracts traded on the Commodity Exchange Inc. (COMEX), announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office.

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Article: Merrill Lynch faces sanctions for extreme scalping role in Korea

Article - Media

Merrill Lynch faces sanctions for extreme scalping role in Korea

Yoo Joon-ho, Lee Eun-joo

Pulse, 18 June 2019

U.S. brokerage Bank of America Merrill Lynch is facing possible disciplinary action from South Korea’s stock exchange authority for its alleged role in market-disrupting high-frequency trading on behalf of U.S. Citadel Securities.

Korea Exchange, the country’s stock exchange operator, said on Tuesday that it will convene a market monitoring committee on Wednesday to determine the level of punishment against Merrill Lynch. The action may include warnings, stern warnings and financial penalties.

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Article: Part 7: Illegal Naked Shorting: DTCC Continuous Net Settlement and Stock Borrowing Programs Have Loopholes That Facilitate Illegal Naked Shorting

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Part 7: Illegal Naked Shorting: DTCC Continuous Net Settlement and Stock Borrowing Programs Have Loopholes That Facilitate Illegal Naked Shorting

Larry Smith

Smith On Stocks, 31 May 2019

There is an integral relationship between the DTCC and hedge funds. The DTCC is owned by Prime Brokers; these are Goldman Sachs, Morgan Stanley, Merrell Lynch and other household name investment banks. Prime Brokers provide basic services to hedge funds that allow them to trade with multiple brokerage houses while maintaining a centralized master account at their prime broker containing cash and securities. The prime broker offers stock loan services, portfolio reporting, consolidated cash management and other services. Hedge fund support is a very meaningful percentage of the net income of Prime Brokers.

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Article: Part 4 in Series on Illegal Naked Shorting’s Role in Stock Manipulation: Who are the Key Players?

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Article: Part 4 in Series on Illegal Naked Shorting’s Role in Stock Manipulation: Who are the Key Players?

Larry Smith

Smith On Stocks, 17 April 2019

I worked on Wall Street as an analyst for nearly 40 years and was involved in the stock market on a day to day basis. Throughout this time, I was focused on fundamental developments that would give an insight into the potential for a company to grow its sales and profits and then trying to translate that into future stock performance. Like many investors, I believed that this was the overarching factor in predicting future stock performance. I had no inkling and I would have been shocked if someone had told me ten years ago what the experience of the past decade has taught, i.e., in many, many cases (particularly for small companies) fundamentals are not the most important factor determining the stock price.

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See All Larry Smith Posts @ SNSS

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Article: Will Naked Short Selling Make a Comeback in 2019?

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Will Naked Short Selling Make a Comeback in 2019?

Cynthia Hetherington

Hetherington Group, 2 January 2019

Many investors “Go Long,” meaning they purchase stocks with the hope of gaining returns as the price of the security increases. A short seller, on the other hand, borrows on a stock and sells, hoping the price will decrease.

A third type of investor is known as a Naked Short Seller. No, this isn’t the story of a guy sipping mai tai’s on a tropical beach in his birthday suit (although he could be and not be committing fraud!).

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Fined: Merrill Lynch, Pierce, Fenner & Smith Incorporated Fined by FINRA

Fined

Merrill Lynch, Pierce, Fenner & Smith Incorporated Fined by FINRA

13 December 2018

An AWC was issued in which the firm was censured and fined $300,000. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to reasonably supervise an associated person who, together with a third-party individual, engaged in a scheme to defraud a customer of the firm. The findings stated that the associated person introduced the customer to the third party using a fictitious name, falsely representing that the third party was a wealthy and successful businessman who could help the customer with his various, existing business and other financial needs.

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Article: South Korea exchange ups scrutiny of Merrill Lynch trading

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South Korea exchange ups scrutiny of Merrill Lynch trading

Song Jung-a, Emma Dunkley

Financial Times, 21 August 2018

South Korea’s stock exchange has stepped up its monitoring of high-frequency trading by the Seoul branch of Bank of America Merrill Lynch after local investors complained about alleged unfair stock trades by the US brokerage.

The scrutiny comes after individual local investors filed petitions to the presidential office, saying they suffered huge losses due to large, high-frequency trades and bets against South Korean stocks through the brokerage since last year.

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Paper: Counterfeiting Stock

Paper

Counterfeiting Stock

Anna McParland

The Creation of Counterfeit Shares — There are a variety of names that the securities industry has dreamed up that are euphemisms for counterfeit shares. Don’t be fooled : Unless the short seller has actually borrowed a real share from the account of a long investor, the short sale is counterfeit. It doesn’t matter what you call it and it may become non–counterfeit if a share is later borrowed, but until then, there are more shares in the system than the company has sold.

The magnitude of the counterfeiting is hundreds of millions of shares every day, and it may be in the billions. The real answer is locked within the prime brokers and the DTC. Incidentally, counterfeiting of securities is as

It is estimated that 1000 small companies have been put out of business by the shorts.

PDF (12 Pages): Paper Counterfeiting Stock

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Article: Merrill Lynch salesman describes shock, anger after Shkreli lost $7 million for Merrill on short trade and then threatens firm if it tries to collect

Article - Media

Merrill Lynch salesman describes shock, anger after Shkreli lost $7 million for Merrill on short trade and then threatens firm if it tries to collect

Dan Mangan

CNBC, 5 July 2017

A Merrill Lynch salesman Wednesday described his shock at learning in February 2011 that Martin Shkreli’s hedge fund was unable cover a short trade that left Merrill Lynch with a $7 million loss a day after assuring the firm the trade could be covered.

Paywall access to article.

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Article: VirnetX Class Accuses Big Brokers of Naked Short Sales

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VirnetX Class Accuses Big Brokers of Naked Short Sales

Chris Fry

Courthouse News Service, 19 December 2016

Investors claim in a federal class action that Goldman Sachs and other banking giants suppressed the share price of VirnetX, “a leader in mobile security technology.”

In addition to Goldman Sachs, the Dec. 14 complaint in Bergen County Superior Court takes aim at Merrill Lynch, Credit Suisse, TD Ameritrade, Charles Schwab and the Bank of New York Mellon. The case is the Top Download for Courthouse News on Monday.

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Article: FINRA Merrill’s system failures produced millions of inaccurate trading records

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FINRA: Merrill’s system failures produced millions of inaccurate trading records

Kenneth Corbin

OnWallStreet, 19 October 2016

Staffers at FINRA’s Department of Market Regulation identified a number of reporting errors in the data Merrill submitted to FINRA’s Order Audit Trail System, or OATS, and cited the firm for failures relating to its supervision practices and its maintenance of books and records.

In a statement announcing the settlement, Thomas Gira, executive vice president and head of market regulation at FINRA, notes the importance of maintaining accurate data through the OATS market-surveillance program to detect signs of market manipulation and other irregularities.

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Article: FINRA fines Merrill Lynch $2.8 million for reporting violations

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FINRA fines Merrill Lynch $2.8 million for reporting violations

Elizabeth Dilts

Reuters, 18 October 2016

The Financial Industry Regulatory Authority fined Bank of America’s Merrill Lynch $2.8 million on Tuesday for what it called systemic violations in record-keeping and how the firm reported trades and order audit trail system data.

The allegations involve trade and order audit data that brokerages submit to FINRA, and which the regulator uses to detect, among other things, possible market manipulation.

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Filing: SEC v Merrill Lynch

Filing

SEC v Merrill Lynch

23 June 2016

Broker-dealers are required to be diligent stewards of the cash and securities entrusted to them by their customers. This basic principle is embodied in Exchange Act Rule 15c3-3, known as the Customer Protection Rule (“Rule”). The Rule requires broker-dealers to safeguard both the cash and securities of their customers so that customer assets can be quickly returned if the firm fails. In broad strokes, a broker-dealer cannot use customer assets to finance the business activities of the firm, and it cannot place customer assets in locations or accounts that make them vulnerable to claims made against the broker-dealer by third parties.

PDF (23 pages): SEC v Merrill Lynch

 

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Article: SCOTUS Rules That Lawsuit Alleging Naked Short Selling Can Proceed in State Court

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SCOTUS Rules That Lawsuit Alleging Naked Short Selling Can Proceed in State Court

18 May 2016

In a unanimous decision that may lead to an increase in the trend of state court suits involving securities litigation, the US Supreme Court ruled this week that an action related to the short sale of securities could proceed in state court. In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, the Court held that the exclusive jurisdiction of securities claims in federal court provided by the Securities Exchange Act is limited to claims “arising under” the Exchange Act.

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