The Securities and Exchange Commission today announced that Merrill Lynch has agreed to pay $415 million and admit wrongdoing to settle charges that it misused customer cash to generate profits for the firm and failed to safeguard customer securities from the claims of its creditors.
An SEC investigation found that Merrill Lynch violated the SEC's Customer Protection Rule by misusing customer cash that rightfully should have been deposited in a reserve account. Merrill Lynch engaged in complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account. The maneuver freed up billions of dollars per week from 2009 to 2012 that Merrill Lynch used to finance its own trading activities. Had Merrill Lynch failed in the midst of these trades, the firm's customers would have been exposed to a massive shortfall in the reserve account.
Source: The Securities and Exchange Commission
(Score: 2, Insightful) by Anonymous Coward on Saturday June 25 2016, @09:25PM
These young guys seems more interested in making money for themselves so they could go out and buy yachts, when they should be trying to make fortunes for their customers!
Back in the day, Wall Street... operated exactly the same way.
(Score: 0) by Anonymous Coward on Sunday June 26 2016, @12:27AM
maybe we need protections, regulations and enforcement for data that we have for monies... HIPAA doesn't even come close, for what it tries to do. the loophole in there is "shared business relationships".
at least for financial institutions, there is some structure and mechanism for money stewardship (for now, but less than before Glass-Stegall was signed away).
At least in US there isnt really an overarching structure. maybe we all need to treat data more like money...
(Score: 2) by davester666 on Tuesday June 28 2016, @08:20AM
I believe US banks/brokerages [really, any bank/brokerage worldwide] operates under the principle "any dollar I can get from you, is a dollar you don't deserve to have, and a dollar that I deserve to have"
(Score: 0) by Anonymous Coward on Sunday June 26 2016, @02:09AM
Back in the day, Pierce, Fenner and Smith would have put a stop to such nonsense.
(Score: 2, Funny) by redneckmother on Sunday June 26 2016, @05:34AM
Too bad. Now we're stuck with Dewey, Cheatham, and Howe.
Mas cerveza por favor.
(Score: 3, Interesting) by JoeMerchant on Saturday June 25 2016, @10:50PM
So, back in the day the FDIC was created to insure against banks doing... basically this. Since it's pointless to keep your money in a bank these days (fees outstrip interest, would do better keeping it under the mattress), and investment firms still can't be trusted - is it time for federal insurance on investment accounts?
Personally, I don't think so. Personally, I think it's time for some serious transparency - if a firm wants to "manage" my money for me, I want them to be accountable. There's no such thing as "trade secrets" in the financial industry, or shouldn't be. Open all the books, explain all the accounts and trades. Too much hassle? Then go into a less regulated industry, like pharmaceuticals.
🌻🌻 [google.com]
(Score: -1, Flamebait) by Ethanol-fueled on Saturday June 25 2016, @10:55PM
What planet are you on where fees outstrip interest? Planet Nigger?
(Score: 3, Informative) by Dunbal on Saturday June 25 2016, @11:08PM
What planet are you on where fees outstrip interest?
Please inform us of the only bank in the world that still actually pays interest to their customers. We'd like to know who it is. It's very easy to have your fees outstrip interest when the interest you are paying is zero (or close to it). That $50 annual service charge, the overdraft fee, the checking fee, the $5 commission for using the "wrong" kind of ATM that night your car broke down, etc. yeah those will pretty much take care of any interest you might earn on your account. Unless of course you're a millionaire - which most people aren't.
(Score: 2) by JoeMerchant on Saturday June 25 2016, @11:29PM
The day my "net worth" hits $1M, I still don't plan to have more than a few thousand in operating funds in my traditional bank account - there are much better returns on investment out there.
🌻🌻 [google.com]
(Score: 5, Insightful) by Dunbal on Saturday June 25 2016, @11:04PM
If you keep your money under the mattress you are in danger of the cops getting it.
(Score: 2) by Non Sequor on Sunday June 26 2016, @12:17AM
The FDIC wasn't created to prevent banks from doing this. The FDIC was created at the same time as Glass-Steagall was passed which required segregation of investment activities from consumer banking and lending. Glass-Steagall was gutted in the late 90's under the premise that new, enlightened economic theories were going to protect everyone.
Anyway, the FDIC doesn't insure your Merrill-Lynch account. There are SEC rules that are supposed to protect you, but if you get burned by your broker breaching those rules and then collapsing, the Federal government doesn't insure squat (although they may play matchmaker in trying to find another company to buy and prop up the failing one). You might be a claimant in the bankruptcy proceedings if that didn't happen, and I believe it would be a secured claim, meaning that in the bankruptcy proceeding, giving you back your cash and securities would be a priority over obligations to bondholders in the company.
Write your congressman. Tell him he sucks.
(Score: 4, Insightful) by The Shire on Saturday June 25 2016, @11:40PM
"The maneuver freed up billions of dollars per week from 2009 to 2012..."
So they freed up hundreds of billions of dollars and after being caught, they have to pay less than half a billion - basically 3-4 days of losses over the course of 3 YEARS. Yea, that should show them, they won't do that incredibly profitable scam again.
(Score: 0) by Anonymous Coward on Sunday June 26 2016, @01:48AM
+1 billion * 52 wk * 4 yr => +204 billions
Yes, a <0.25% hand-out seems totally appropriate as a deterrent.
(Score: 3, Informative) by archfeld on Sunday June 26 2016, @01:22AM
If they agreed to pay $415 Million then the real amount must be more like a billion. They should pay the fine and do say like 10-15 in prison. Something comparable to a grand theft charge that one would get for stealing far far less money. This so-called white collar crime bias is total BS. Use a computer go to jail...
For the NSA : Explosives, guns, assassination, conspiracy, primers, detonators, initiators, main charge, nuclear charge
(Score: 1, Insightful) by Anonymous Coward on Sunday June 26 2016, @06:20PM
This so-called white collar crime bias is total BS. Use a computer go to jail...
It's not about white collar crime, it's more of whether you're in one of the right gangs/clubs or not.
Because if you tried the a similar white collar crime thing you'd go to jail. If you don't believe me, you can try it, get a job at a bank and _temporarily_ transfer other people's money (without their permission) into your account to use for investment (stock market, currency trading or whatever) then transfer it back. And then let yourself get caught.
FWIW MF Global and the people involved got away with something like this too.
Same for money laundering. When HSBC etc do it, nobody goes to jail, but when some non-blessed small timer does it for less than a million, he/she goes to jail for a long time.
(Score: 2, Insightful) by Anonymous Coward on Sunday June 26 2016, @01:47AM
They should pay any profits from this to the affected customers plus the $415M fine.