Merrill Lynch has agreed to pay a $225,000 fine and accept a censure from FINRA for failing to report more than 1,600 customer complaints submitted through post-call surveys between 2018 and 2023, according to a settlement finalized on Wednesday.
The firm’s surveillance system failed to properly identify complaints in the free-form comment sections of post-call customer surveys, according to the Financial Industry Regulatory Authority settlement. In 2023 alone, Merrill received more than 220,000 survey responses but identified only around 2,400 complaints while missing 1,600 others.
The root cause was a lexicon of search terms and criteria that had been developed for consumer banking products rather than broker-dealer services, making it improperly designed to catch complaints specific to investment customers. Most of the missed complaints involved routine service issues, but others related to customers’ inability to access funds or obtain account information, technical problems with online systems, and security incidents, FINRA said.
Under FINRA Rule 4530, member firms must submit quarterly statistical and summary information about written customer complaints by the 15th day of the month following the end of each calendar quarter. Merrill’s failure to identify and report the complaints meant it violated its obligation to establish a reasonable supervisory system to comply with these reporting requirements.
In determining the fine, FINRA credited Merrill for self-reporting the issue, conducting a review of 2023 survey responses, resolving complaints identified during that review, and subsequently reporting them to the regulator. The firm suspended the written comment section of its post-call surveys in January 2024 after identifying the deficiency. Merrill agreed to the settlement without admitting or denying the findings.
Sources
- AdvisorHub — core settlement details, violation timeline, survey response volumes, nature of missed complaints, and self-reporting credit
- Financial Advisor IQ — settlement confirmation and complaint count
- FINRA official guidance — Rule 4530 quarterly reporting requirements and deadlines
