Merrill Lynch agreed to pay a $5 million NASD fine to settle charges that the firm's brokerage client call centers were poorly supervised. With locations in Hopewell, N.J., and Jacksonville, Fla., the call centers, or Financial Advisory Centers (FACs), were found to have lacked adequate supervisory controls, which led to a variety of improprieties committed by brokers at the two locations between 2001 and 2004.
“In this case, Merrill Lynch failed to meet these basic standards by permitting its call center to function without proper supervisory controls, which gave rise to impermissible sales contests, unsuitable mutual fund switches and other systematic failures,” said James Shorris, acting head of NASD enforcement.
Merrill neither admitted nor denied the charges, and, in a statement provided by the firm, it said the problems have long since been fixed: “We have acknowledged that we had growing pains in Merrill Lynch's Financial Advisory Center four and five years ago when it expanded. We are confident we've worked them out, made significant changes to our operations and management and offer a service that 90 percent of our FAC clients tell us leaves them 'highly satisfied.' ”
The FAC caters to clients holding accounts with less than $100,000. In 2000, as Merrill Lynch ramped up its efforts to increase operational efficiency and profitability, focusing branch office brokers on wealthier clients, the firm's call center operations grew. According to the NASD, more than one million clients were transferred to Merrill's FACs between March 2001 and August 2002.