SEC Charges Firm with Misusing Customer Order Information and Charging Undisclosed Trading Fees

SEC Release (Enforcement)

The SEC announced a settled administrative proceeding against a Merrill Lynch entity for allegedly (1) misusing customer order information to place proprietary trades and (2) charging customers undisclosed trading fees. The order alleges that a proprietary trading desk at ML traded on information gained from institutional customer orders at ML's market making desk. In addition, the order alleges that ML charged some customers markups or markdowns when it represented that it would only charge a commission equivalent to executing riskless principal trades. Notably, the release does not charge ML with "front running" and does not allege a violation of § 10(b) of the Exchange Act or Rule 10b-5 thereunder.

Please contact any of the following Cadwalader attorneys if you have any questions about this item:

Steven Lofchie; [email protected]

Jeffrey Robins; [email protected]

Maurine Bartlett; [email protected]

Glen Barrentine; [email protected]

Document Number

SEC Release 34-63760

Date

January 25, 2011

Cross References (links may require a Cabinet subscription)

SEC PR 2011-22

Exchange Act §§ 15(c)(1)(A), 15(g)

Exchange Act Rule 17a-3(a)(6)

Securities Act § 17(a)