Merrill Lynch ordered to pay $15 million to settle mortgage securities charges

SEC says firm employees misled customers into overpaying for RMBS debt.

The Securities and Exchange Commission has ordered Merrill Lynch to pay more than $15 million to settle charges that its employees misled customers into overpaying for residential mortgage-backed securities (RMBS).

The SEC said that the firm agreed to repay more than $10.5 million to its customers and to pay penalties of approximately $5.2 million, according to a release from the agency.

In its order, the SEC found that Merrill Lynch traders and salespersons persuaded customers to overpay for the securities by deceiving them about the price Merrill Lynch paid to acquire the securities. The order also found that the firm’s RMBS traders and salespersons illegally profited from excessive, undisclosed commissions – called “mark-ups” – which in some cases were more than twice the amount the customers should have paid.

According to the SEC’s order, Merrill Lynch failed to have reasonably designed compliance and surveillance procedures in place to prevent and detect the misconduct.

Without admitting or denying the findings, Merrill Lynch agreed to be censured and to pay the penalties, disgorgement and interest the SEC imposed.