Komfie Manalo, Opalesque Asia:
Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) was
ordered to pay a fine of $1.2m by the U.S. Commodity Futures Trading
Commission (CFTC) for failing to diligently supervise its officers’,
employees’, and agents’ processing of futures exchange and clearing fees
charged to its customers from at least January 1, 2010 through April
Merrill Lynch is a CFTC-registered Futures Commission Merchant and
approved swap firm located in New York, New York.
The CFTC charged that Merrill Lynch’s fee reconciliation process for
identifying and correcting discrepancies between the invoices from the
exchange clearinghouses and the amounts charged its customers had been
faulty for more than two years. As a result, Merrill over-accrued fees
from some clients and under-accrued fees from others.
These fee reconciliations show that Merrill paid more than $318m in
exchange and clearing fees to the CME and Chicago Board of Trade during
that time, but had unexplained over-accruals of approximately $451,318
(0.14% of fees paid) from 196 clients, according to the order.
Additionally, the CFTC Order finds that Merrill Lynch did not hire
qualified personnel to conduct and oversee its fee reconciliations and
did not provide any completed procedures manuals regarding fee
reconciliations to its staff until at least April 2013. The Order also
finds that procedures Merrill Lynch did have up until that time were
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