Bank of America to pay $430M settlement to US government

By Barry Eitel

SAN FRANCISCO (AA) – Bank of America will pay $430 million in settlements to the U.S. for violating regulations meant to protect consumers, the Securities and Exchange Commission (SEC) said Thursday.

According to the S.E.C., $415 million of the settlement is being paid in response to charges that the bank’s Merrill Lynch wealth management unit misused consumer money.

From 2009 to 2015, the settlement claims, Merrill Lynch used brokerage customer funds to finance the firm’s own trading. The case resulted in the largest customer protection settlement in the SEC’s 82-year history.

“The rules concerning the safety of customer cash and securities are fundamental protections for investors and impose lines that simply can never be crossed,” Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, said in a statement. “Merrill Lynch violated these rules, including during the heart of the financial crisis, and the significant relief imposed today reflects the severity of its failures.”

Ceresney claimed that Merrill Lynch held up to $58 billion per day of bank customer money in an account that earned profits for the firm. While no customer lost money because of the scheme, customers were exposed to possible liens.

As part of the settlement, Bank of America did not admit wrongdoing.

"While no customers were harmed and no losses were incurred, our responsibility is to protect customer assets and we have dedicated significant resources to reviewing and enhancing our processes,” Merrill Lynch spokesman William Halldin said in a statement. “The issues related to our procedures and controls have been corrected.”

The SEC said it will now perform a comprehensive sweep of other financial firms to determine if customer money is being misused to earn profits for banks.