Merrill Told to Pay $9.5M After Not Disclosing Fees

Clients must wait nearly a year to receive restitution.

Reviewed by: Michelle Lodge
Edited by: Michelle Lodge

The brokerage firm Merrill Lynch Pierce Fenner & Smith, known now as Merrill, has agreed to pay disgorgement, prejudgment interest and a civil penalty totaling more than $9.5 million and to distribute funds to harmed clients, after the Securities and Exchange Commission ordered it to do so on April 4 for charging clients more than $4 million in undisclosed foreign exchange fees for transfers to or from their accounts.  

“Investment advisers must ensure that they do not selectively disclose some fees but not others relating to a particular service,” Antonia M. Apps, director of the SEC’s New York regional office, said in a statement.  

“While Merrill Lynch disclosed the markups or markdowns charged on foreign currency exchanges, thousands of clients were left in the dark as to an often-larger fee charged on these transactions and were charged millions of dollars in undisclosed fees,” she added. 

Merrill consented to the entry of the SEC’s order determining that it violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and related rules. By neither admitting nor denying the SEC’s finding, the brokerage firm consented to a cease-and-desist order, a censure and to pay disgorgement of some $4.1 million, prejudgment interest of $760,000 and a civil penalty of $4.8 million.  

Defrauded advisory clients won’t receive restitution from Merrill for at least eight months. The firm has 90 days to submit its calculations to the SEC and then another 30 days to turn over payment files for the commission’s review. Those times do not include the commission’s review periods. After the SEC approves the payment files, Merrill has 75 days to pay back those affected. 

A spokesperson for Bank of America, which owns Merrill, told that it has updated its disclosures. The revision aims to prevent a repeat of Merrill’s failure to reveal its “production credits” from the foreign exchange fees.  

Although Merrill did disclose fees, the foreign exchange fees related to production credits weren’t broken out on statements between June 2020 and March 2022. That meant clients were unaware of what all of the fees that were billed were for.  

In March 2022, Merrill issued a disclosure to clients that explained that the wrap fee program does not cover foreign currency exchanges and also provided a link to a page with more details about the fees charged.  

A wrap fee is an all-inclusive charge for the services of an investment manager or advisor, and may include investment advice and research, brokerage services and administrative fees. 


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Michelle Lodge is a journalist who is a contributor to many sites: Fortune, Money, Time, Barron’s, Investopedia, and