By Howard Haykin

In January 2019, a broker with Merrill Lynch, Pierce, Fenner & Smith provided Firm customers with information about various Certificates of Deposits (“CDs”) offered by the Firm. On January 16th, the customers purchased CDs – one for $150,000, the other for $200,000.

The next day, the broker informed the customers that she had made an error in describing the CDs’ terms and offered to sell the CDs out of their accounts. The broker also informed the customers that she would reimburse them for any realized losses - which amounted to $511 and $722, respectively. As promised, on January 22nd, the broker sent each customer a cashier's check that she purchased with funds drawn on her personal bank account. THE CUSTOMERS PROMPTLY DEPOSITED THE CHECKS IN THEIR ACCOUNTS ... AT MERRILL LYNCH!

TAKE AWAYS.    For whatever reason, the broker chose not to tell Merrill Lynch about her errors. So she effectively lied to the firm by trying to do everything in her power to resolve the situation herself. She communicated with the customers by text messages sent from her personal cell phone, and reimbursed them with funds drawn on her personal bank account. 

Unfortunately, the devil is in the details, and the broker missed one critical step in the execution – not telling the customers to deposit the checks in their personal bank accounts. For her efforts, the broker was fined $5,000 and suspended 2 months.

[For further details, click on … FINRA Case #2019061778602.]