Merrill Lynch, Pierce, Fenner & Smith has agreed to pay a fine of $825,000 as part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From February 2017 to the present, external investment managers, financial advisors, and clients entered stock orders into the company's electronic order systems. The company conducted verification checks on the orders before routing them to market centers for further processing and/or execution. One such system was the Equity Order System (EOS), which allowed external investment managers to transmit files containing thousands of orders each time.

Upon acceptance into the EOS system, Merrill Lynch conducted verification checks to ensure the integrity of the order files and individual orders, such as checking for completeness of all fields and various substantive accuracy, business, and regulatory checks (e.g., verifying security codes, prices, and other order terms). Once verified, orders were eventually sent to market centers for further processing or execution.

During this period, Merrill Lynch's supervisory systems, including its written supervisory procedures, were not reasonably designed to comply with Rule 5310.01 requirements, as Merrill Lynch only reviewed the timeliness of execution of orders processed through the company's electronic order systems, from the routing of orders to market centers for further processing or execution to final execution.

Merrill Lynch did not supervise the processing time of orders through the company's electronic order systems and routing to market centers.

By omitting the processing time of electronic order systems in supervisory reviews, from the time orders were received to routed to market centers, Merrill Lynch failed to reasonably supervise whether it made every effort to fully and promptly execute the tradable customer orders received. Consequently, Merrill Lynch violated FINRA Rule 3110(a) and (b) as well as Rule 2010.

At least since February 2017, Merrill Lynch's supervisory systems, including its written supervisory procedures, were not reasonably designed to comply with SEC and FINRA record-keeping requirements, as Merrill Lynch did not conduct supervisory reviews to ensure the accuracy of information recorded on order memoranda for retail brokered stock orders received by the company.

As a result, Merrill Lynch violated FINRA Rule 3110(a) and (b) as well as Rule 2010. In addition to paying the $825,000 fine, Merrill Lynch has also agreed to accept censure.