by Howard Haykin

A Managing Director in the Private Executive Services team of Merrill Lynch, Pierce, Fenner & Smith agreed to pay a $10K fine and serve a 1-year suspension to settle FINRA charges that he submitted dozens of business expense reimbursement requests that he knew, or was reckless in not knowing, were not compliant with his member firm’s reimbursement policies.

FINRA FINDINGS.    As part of his job as Managing Director, this individual traveled extensively, often meeting and dining with clients, prospective clients, business colleagues, and team members with whom he worked. He incurred substantial business expenses which were reimbursable under Firm policy through either a corporate expense account funded by Merrill Lynch or a business development account funded largely by the individual's pre-tax earnings. 

The firm permitted the Managing Director to use his personal credit card to charge business expenses and, when seeking reimbursement of those expenses from the firm, he submitted his receipts along with an expense report to document, among other things, the business purpose of the expenses and, where relevant, other persons involved or present.

Over a three year period, the Managing Director submitted over 600 expense reimbursement requests. His practice was to provide his receipts to subordinate employees at the firm so that they could prepare and submit the associated expense report to the firm on his behalf. Given the frequency of his business travel and entertaining, the Managing Director often provided these subordinate employees numerous receipts at the same time, and on some occasions, he provided information that he knew, or was reckless in not knowing, was inaccurate.

However, his expense reimbursement requests sometimes …

• described meals with his team members as meals with clients, or personal meals as business meals.
• contained inaccurate information about the reported attendees at meals.

►   e.g., a 4/18/15 expense for $430 was identified as a client meal with a client rep in attendance, when in fact only the Managing Director and another Merrill Lynch employee were present.

• in all, at least 82 expenses, primarily business-related meals, contained inaccurate information.

POST-SCRIPT.    Merrill Lynch U5’d the Managing Director in October 2016 for “conduct including improper submission of person expenses for reimbursement, resulting in management’s loss of confidence.” He had been associated with the firm for 21 years – from 1995 to 2016.

This case was reported in FINRA Disciplinary Actions for January 2018.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2015048118501.