Merrill Lynch, Sentinel Securities Fined for Failure to Supervise

by InvestorLawyers on November 12, 2013

in Arbitration,FINRA,Massachusetts,Merrill Lynch,Securities Fraud

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Merrill Lynch and Sentinel Securities Inc. Both firms have recently been fined by Massachusetts regulators for failing to adequately supervise employees who used customer funds for their own personal benefit.

In one case, registered representative Jane E. O’Brien reportedly borrowed client funds amounting to more than $2 million.  O’Brien allegedly used client funds that should have been invested in a software company for personal expenses. According to Massachusetts prosecutors and regulators, O’Brien has pleaded guilty to charges of fraud. She was sentenced to 33 months in prison and was barred from the securities industry.

In addition, regulators say that Merrill Lynch should have suspected that O’Brien was in financial trouble when she removed $380,750 from her retirement account prematurely, incurring tax penalties, but they didn’t inform regulators about a conduct review until almost a week after the Justice Department indicted her. Merrill was ordered to pay a fine of $500,000 for allegedly failing to adequately supervise O’Brien.

The firm agreed to pay the fine but did not admit to violating the law. Reportedly, O’Brien earned $903,734 in revenue in her first year and brought in client assets amounting to almost $154 million. According to William F. Galvin, the secretary of the commonwealth for the state of Massachusetts, “This is in my estimation yet another example of top producers often being held to a different standard because of the revenue they bring to the firm.”

Massachusetts has also fined Sentinel Securities Inc. for failure to supervise. This case regarded the actions of an operations manager who allegedly moved funds to his own account from the firm’s accounts. Sentinel Securities has been ordered to pay a fine of $50,000.

Financial Industry Regulatory Authority rules have established that firms must properly supervise brokers’ activities while they are registered with the firm. If they fail to do so, the firms can be held responsible for the activities of their representatives and, thus, could be ordered to compensate their clients for losses sustained for the period they were registered with the firm.

If you have suffered significant losses as a result of misappropriation by a stockbroker or financial advisor, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.

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