Idea Transcript
Updated: November 1, 2018 Merrill Lynch Professional Clearing Corp. (the "Company” or “MLPro”), a Delaware corporation, is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a Futures Commission Merchant (“FCM”). The Company maintains its principal place of business at One Bryant Park, New York, NY10036. Bank of America Corporation (the "Corporation" or “Bank of America”), the Company’s ultimate parent (the “Parent”) makes all required disclosures in its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, which may be updated by Current Reports on Form 8-K, all of which are filed with the Securities and Exchange Commission ("SEC") ("Regulatory Filings"). The Company makes all required disclosures in its Form BD filing (“Form BD Filing”) with the Financial Industry Regulatory Authority ("FINRA"). Those Regulatory Filings and Form BD Filing include disclosures of Regulatory Inquiries as required by federal law and applicable regulations. The Regulatory Filings are publicly available on the SEC’s website at www.sec.gov. The Form BD Filing is publicly available on the FINRA BrokerCheck system at http://brokercheck.finra.org/. In the ordinary course of business, the Company is routinely a defendant in or party to many pending and threatened legal, regulatory and governmental actions and proceedings. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be. In accordance with applicable accounting guidance, the Company establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probably and estimable. Once the loss contingency related to a matter is deemed to be both probable and estimable, the Company will establish an accrued liability and record a corresponding amount of litigation-related expense. The Company continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. The actions against the Company include, but are not limited to, the following: LITIGATION Overstock.com Short-Selling Litigation In January 2016, the Company resolved claims against it in the action Overstock.com, Inc et al. v. Morgan Stanley et al. pending in California Superior Court (San Francisco County). The amount of the settlement was fully accrued as of December 31, 2015. The plaintiffs accused the Company of violating California state securities laws and causing a decline in Overstock.com’s stock price to their detriment. Merrill Lynch Professional Clearing Corp. One Bryant Park New York, NY 10036
REGULATORY ACTIONS SEC Customer Protection Rule Order 6/23/2016 On June 23, 2016, the SEC issued an administrative order in which it found that Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and MLPro (collectively, “ML”) had willfully violated Section 15(c)(3) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 15c3-3 thereunder and Section 17(a)(1) of the Exchange Act and Rules 17a-3(a)(10) and 17a-5(a) thereunder, and that Merrill Lynch willfully violated Section 17(a)(1) of the Exchange Act and Rules 17a-5(d)(3) (as it existed prior to amendments to Rule 17a-5 in 2014), 17a-5(d)(2)(ii), 17a-5(d)(3) and 17a-11(e) thereunder, and Exchange Act Rule 21F-17. Specifically, the order found that (i) ML engaged in a series of complex trades that allowed it to use customer cash to finance firm inventory and (ii) Merrill Lynch allowed certain of its clearing banks to hold liens on customer securities. In determining to accept ML’s offer, the SEC considered remedial acts promptly undertaken by ML and substantial cooperation afforded the SEC staff during the course of its investigation. In the order, (i) Merrill Lynch and MLPro were censured, (ii) Merrill Lynch was ordered to cease and desist from committing or causing any violations and any future violations of Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-3, 17a-3(a)(10), 17a-5(a), 17a5(d)(2)(ii), 17a-5(d)(3), 17a-11(e) and 21F-17 thereunder, (iii) MLPro was ordered to cease and desist from committing or causing any violations and any future violations of Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-3, 17a-3(a)(10) and 17a-5(a) thereunder, (iv) Merrill Lynch and MLPro were ordered to pay disgorgement of $50,000,000 and prejudgment interest in the amount of $7,000,000, and (v) Merrill Lynch was ordered to pay a civil monetary penalty of $358,000,000. No customers were harmed, and the issues related to ML’s procedures and controls have been corrected.
Merrill Lynch Professional Clearing Corp. One Bryant Park New York, NY 10036