Merrill Lynch will pay New Hampshire more than $26 million to settle a case against the broker/dealer and one of its agents, the state’s Bureau of Securities Regulation announced Monday. The fine is the largest monetary sanction in the bureau’s history.
The agreement also settles a pending FINRA arbitration case against Merrill and broker Charles Kenahan, and the amount marks the second largest FINRA settlement in the last 10 years, according to CNBC.
According to New Hampshire’s Bureau of Securities Regulation, Merrill Lynch failed to supervise Kenahan, who allegedly made trades without authorization, excessively traded stocks and IPOs and overcharged commissions, among other accusations. Kenahan’s actions resulted in significant commissions for Merrill Lynch, but heavy losses for one harmed investor, who’d originally complained to the Bureau of Securities Regulation in January 2019.
The investor was “high net worth,” according to the bureau, and had been a client of Merrill Lynch since Kenahan joined the firm in 2007. The investor asked Kenahan and Merrill to recommend investment strategies, and Kenahan suggested purchasing a company whose low-priced stock was not even followed in the firm's research.
Though the bureau did not name the harmed investor, CNBC reported that it was actually former New Hampshire Gov. Craig Benson, citing sources familiar with the settlement.
According to CNBC, Benson was a client of Kenahan and reached out to the bureau after filing a FINRA arbitration claim against Merrill, Kenahan and another broker, alleging excessive and unauthorized trading, overcharging commissions and a breach of fiduciary duty. Benson claimed that he lost more than $50 million as a result of their conduct, CNBC reported.
Merrill Lynch fired Kenahan in 2019, and the investor (named by CNBC as Benson) subsequently removed his business from Merrill. CNBC reported that New Hampshire will receive $2 million, while Benson will get $24.25 million in restitution.