Merrill Lynch and the US Securities and Exchange Commission have settled proceedings brought over a failure by the company to promptly produce emails requested by SEC staff. The brokerage firm will pay $2.5m.
The proceedings related to “various investigations and inquiries” being carried out by SEC staff into Merrill Lynch between October 2003 and February 2005. In the course of this, according to the SEC, it had asked the firm to provide certain emails dealing with its business as a broker, dealer and member of an exchange.
US regulatory rules require that securities and investment firms have adequate systems, procedures and policies in place to promptly produce evidence, including emails, requested in the course of an investigation. Communications relating to its business must be kept for three years.
However, according to the SEC, on numerous occasions Merrill Lynch was unable to furnish the requested emails promptly. On one occasion it took around seven months to produce the emails, on another around five months. The regulator found that Merrill Lynch had wilfully breached the Securities and Exchange Act 1934, and Rules relating to it.
The action has now settled, with the firm, which has not admitted any wrongdoing, undertaking to review its systems, procedures and policies in connection with email retention and to appoint a consultant to advise on the review.
The SEC has censured Merrill Lynch and imposed a penalty of $2.5m. Merrill Lynch spokesman Mark Herr told Reuters that the firm has improved its systems and now believes it is able to promptly provide any further requested emails.
The SEC Order (7-pages / 57KB PDF)
Copyright © 2006, OUT-LAW.com
OUT-LAW.COM is part of international law firm Pinsent Masons.