The SEC settled charges against Merrill Lynch Pierce Fenner & Smith Inc. of failing to perform required gatekeeping functions in the unregistered sales of securities on behalf of a China-based issuer and its affiliates.
The regulator accused Merrill Lynch of selling almost 3 million shares of Longtop Financial Technological Ltd.'s securities into the market despite red flags indicating that the sales could be part of an unlawful unregistered distribution.
The SEC said the distribution generated almost $38 million in proceeds for the overseas issuer and its affiliates. The regulator has revoked the registration of Longtop's securities.
Without admitting or denying the regulator's findings, the firm agreed to be censured and consented to the order requiring it to cease and desist from committing or causing any future violations.
The order also required Merrill Lynch to pay a penalty of $1.3 million and more than $154,000 in disgorgement and prejudgment interest from commissions and fees earned on the alleged improper sales.
Merrill Lynch is a business of Bank of America Corp.
