Monthly Archives: June 2016

Merrill Lynch underwrites, manages and markets the sale of Market-Linked Notes issued by its parent company, Bank of America Corporation, and numerous other unaffiliated banks.

Market-Linked Notes were purportedly recommended by Merrill Lynch financial advisors to customers as a stable source of income. Many investors did not adequately understand or comprehend the extreme risks associated with Market-Linked Notes or how they worked. In many instances, Market-Linked Note investments tracked oil prices, energy pipelines, or commodity baskets and have resulted in significant investor losses.

How do Market-Linked Notes Work?

Merrill Lynch managed Market-Linked Notes to generate greater returns through the use of embedded derivatives designed to track the performance of volatile securities, indices, commodities or currencies. In many instances Market-Linked Notes offered little if any principal protection. Merrill Lynch financial advisors purportedly recommended and/or solicited investments based on the potential returns without properly disclosing the risks associated with Market-Linked Notes.

Merrill Lynch purportedly provides incentives to its financial advisors for the sale of proprietary products, such as Market-Linked Notes issued by affiliated banks. Market-Linked Notes may have substantial fees and/or commissions paid to affiliated companies for banking, underwriting and asset management. Merrill Lynch may have failed to properly explain the risks associated with Market-Linked Notes to investors whose performance and interest crediting is tied to specific securities, commodities, indices or currencies, sometimes with leverage up to 200%.

In June 2016, Merrill Lynch agreed to pay a $10 million penalty to the U.S. Securities & Exchange Commission to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

In June 2012, the Financial Industry Regulatory Authority (FINRA) censured and fined Merrill Lynch $450,000 for sales practice violations related to the sale of Structured Securities Products, referred to as Market-Linked Notes. According to FINRA’s findings in the Letter of Acceptance Wavier and Consent, more than 50% of the 650,000 Structured Securities Product transactions were issued by the parent of Merrill Lynch. FINRA regulators found that there was inadequate supervision of customer accounts to determine whether there were unsuitable levels of concentration in Market-Linked Notes.

Merrill Lynch has underwritten, managed and marketed to its customers billions of dollars in Market-Linked Notes including, for example, the following:

Bank of America – Autocallable Market-Linked Step Up Notes Linked to the S&P Oil & Gas Exploration and Production Select Industry Index Bank of America – Strategic Return Notes
Bank of America – Accelerated Return Notes® Linked to the Merrill Lynch Commodity Index eXtra Precious Metals Plus – Excess Return
Credit Suisse – Accelerated Return Notes®
HSBC USA – Market Index Target Term Securities®
HSBC USA – Capped Leveraged Index Return Notes®

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Merrill Lynch & Co., Inc., please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

A recent article in The Wall Street Journal (“SEC Readies Case Against Merrill Lynch Over Notes That Lost 95%”) stated that the Securities and Exchange Commission is preparing a civil enforcement case against Merrill Lynch over a structured note investment that fell as much as 95% in value and was marketed in a way that one of the firm’s financial advisers called “borderline crooked.”

“The probe involves a product called Strategic Return Notes that Merrill sold over a number of months in 2010, raising about $150 million. Linked to a Merrill Lynch index tracking the volatility of the S&P 500 stock index, the five-year notes lost value rapidly after they were issued, as market volatility fell and the cost of buying the options upon which the notes were based rose sharply.”

Structured notes are extremely complex securities that are custom-built by banks out of options and other derivatives and are often sold to retail investors.

Wall Street investment banks sell an estimated $40 billion to $50 billion of structured notes each year and they rank among the most common types of securities in arbitration claims filed with the Financial Industry Regulatory Authority (FINRA).

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Merrill Lynch & Co., Inc., please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Oppenheimer & Co., one of the most sanctioned and criticized brokerage firms on Wall Street, has been once again the subject of a massive regulatory fine (“FINRA Sanctions Oppenheimer & Co. $2.9 Million for Unsuitable Sales of Non-Traditional ETFs and Related Supervisory Failures”) according to a release issued by the Financial Regulatory Authority, Inc. (“FINRA”) on June 8, 2016.

This latest enforcement proceeding was the result of Oppenheimer having sold “leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs) to retail customers without reasonable supervision, and for recommending non-traditional ETFs that were not suitable.”

According to the FINRA release, notwithstanding the fact that “Oppenheimer’s procedures prohibited solicitation of non-traditional ETFs,” between August 2009 and September 30, 2013, “more than 760 Oppenheimer representatives executed more than 30,000 non-traditional ETF transactions totaling approximately $1.7 billion for customers.”

FINRA also found that “Oppenheimer failed to conduct adequate due diligence regarding the risks and features of non-traditional ETFs and, as a result, did not have a reasonable basis to recommend these ETFs to retail customers. Similarly, Oppenheimer representatives solicited and effected non-traditional ETF purchases that were unsuitable for specific customers.”

A complete copy of this latest regulatory enforcement proceeding can be accessed through the FINRA website at http://disciplinaryactions.finra.org/Search/ViewDocument/66217.

Moreover, a cursory review of the FINRA BrokerCheck report for Oppenheimer & Co. indicates that the firm has now been the subject of at least 83 regulatory enforcement proceedings and hundreds of customer-initiated arbitration proceedings.

Of equal and perhaps greater importance, a recent academic study (“The Market for Financial Adviser Misconduct”) found that more than one in seven financial advisers at Oppenheimer & Co. “have engaged in misconduct in their past” and that “almost one in five financial advisers at Oppenheimer & Co. have been disciplined for misconduct in the past.”

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Oppenheimer & Co., please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).