Merrill Lynch to pay $415 million for misusing customer cash

Bank of America Corp.'s Merrill Lynch unit will pay $415 million in the largest customer protection settlement in the Securities and Exchange Commission's history and admit to wrongdoing to settle charges that it misused customer cash, the U.S. regulator said Thursday.

An SEC investigation found that Merrill Lynch violated the an SEC rule in place for protecting customers' assets by holding up to $58 billion a day in a clearing account that should have been deposited in a reserve account, said Andrew Ceresney, SEC enforcement director.

The maneuver, which occurred between 2009 to 2015, freed up billions of dollars per week for Merrill Lynch, which financed the firm's trading activities for part of that time, the SEC said.

But if Merrill Lynch's business failed during those trades, customers would have been exposed to a massive shortfall in the reserve account, the SEC said.

'While no customers were harmed and no losses were incurred, our responsibility is to protect customer assets and we have dedicated significant resources to reviewiLynchng and enhancing our processes,” said Merrill Lynch spokesman William Halldin in a statement.

'The issues related to our procedures and controls have been corrected. We have cooperated fully with the SEC staff throughout this investigation,” Halldin said.

Merrill Lynch also violated an SEC rule by using language in severance agreements to stop employees from coming forward to the SEC with information, the SEC said. The company has since revised the agreements and launched a whistleblower training program for employees.

The case came to light after multiple former Bank of American executives reported the company's misconduct to the SEC, said Jordan Thomas, the whistleblowers' New York lawyer.