Merrill Lynch To Pay $15 Mln In Fines To Settle RMBS Cheating Charges: SEC

(RTTNews) - The Securities and Exchange Commission Tuesday said Merrill Lynch, Pierce, Fenner & Smith Inc. will pay more than $15 million to settle charges that its employees misled customers into overpaying for Residential Mortgage Backed Securities.

Merrill Lynch agreed to repay more than $10.5 million to its customers and to pay penalties of about $5.2 million.

The SEC found that Merrill Lynch traders and salespersons convinced the bank's customers to overpay for RMBS by deceiving them about the price Merrill Lynch paid to acquire the securities.

The order also found that Merrill Lynch's RMBS traders and salespersons illegally profited from excessive, undisclosed commissions, which in some cases were more than twice the amount the customers should have paid.

"In opaque RMBS markets, lying to customers about the acquisition price can deprive investors of important information," said Daniel Michael, Chief of the SEC Enforcement Division's Complex Financial Instruments Unit. "The Commission found that Merrill Lynch failed in its obligation to supervise traders who allegedly used their access to market information to take advantage of the bank's own customers."