| NEW YORK
NEW YORK Nov 30 The Financial Industry
Regulatory Authority said on Wednesday it fined Bank of America
Merrill Lynch $7 million for inadequate supervision of
client brokerage accounts that used leverage to buy Puerto Rican
municipal bonds and other securities.
FINRA found that between 2010 and mid-2013, Merrill Lynch's
systems did not adequately enforce policies that govern how
clients can use securities-backed loans. Lines of credit, called
loan management accounts at Merrill Lynch, allow clients to
borrow money using the securities in their portfolios as
FINRA found Merrill Lynch's systems failed to ensure the
suitability of Puerto Rican municipal bonds and closed-end funds
for customers who were highly leveraged through these loans or
whose investments were mostly concentrated in Puerto Rican
FINRA said that 25 customers with modest net worth had
three-quarters of their portfolios invested in Puerto Rican
securities and lost a total of $1.2 million.
The fine includes $780,000 in restitution for those clients.
"Following a comprehensive internal review of our loan
management accounts, we reported issues to FINRA, cooperated
fully with their inquiry and have strengthened our controls and
procedures," Bank of America spokesman Bill Halldin wrote in an
Merrill Lynch neither admitted nor denied the charges.
(Reporting By Elizabeth Dilts; Editingnby Steve Orlofsky)