The U.S. Commodity Futures Trading Commission today issued an order filing and settling charges against Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch), a registered futures commission merchant, for failing to promptly produce to the CFTC certain required records and, separately, failing to supervise its employees and agents to ensure that they fulfilled the firm’s statutory and regulatory obligations to keep and promptly produce such records.
The order finds that for nearly three years, Merrill Lynch failed to produce reliable audit trail data requested by the Division of Enforcement. According to the order, these failures substantially delayed a CFTC investigation and were attributable in large part to Merrill Lynch’s failure to develop and diligently administer adequate procedures for responding to routine regulatory requests — for example, Merrill Lynch did not have a process in place to locate account numbers or order entry operator identification numbers; instead, operations personnel simply worked from memory when searching for the data.
In addition to imposing a $300,000 civil monetary penalty, the order notes that Merrill Lynch has already taken steps to revise its internal process for responding to regulatory data requests, including, but not limited to, designating personnel to: (1) interpret regulatory data requests, the source of the information, and the timing for the response; (2) locate and provide the data; and (3) independently assess the data extraction process and results.
“As this case shows, the CFTC will hold registrants accountable for their regulatory obligations,” said James McDonald, director of the CFTC’s Division of Enforcement. “Recordkeeping requirements are important for regulatory and enforcement purposes, and the failure to produce reliable audit trail data here impeded a CFTC investigation.”
The CFTC Division of Enforcement staff members responsible for this action are Amanda Burks, Jordon Grimm, and Rick Glaser. Additionally, Raagnee Beri and Elizabeth Davis contributed to the case while members of the Division of Enforcement staff.