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FINRA Fines Merrill Lynch $300,000 Over Alleged Supervisory Failures

Merrill LynchRecent news articles and publicly available records provided by the Financial Industry Regulatory Authority (FINRA) report that FINRA has fined Merrill Lynch $300,000 in connection to that firm’s failure to supervise a broker who allegedly defrauded a firm customer in association with what AdvisorHub describes as a “well-known con man,” with whom the broker allegedly worked to steal millions of dollars from a professional athlete. AdvisorHub identifies the broker as Eva Weinberg, though she is only named in a Letter of Acceptance, Waiver and Consent signed by the firm as “EW.”

According to the AdvisorHub report, Weinberg and the third party “con man” later pled guilty to “various crimes.” FINRA’s consent later states that Merrill Lynch failed to adequately maintain supervisory systems that would have allowed the firm to respond to red flags indicating the broker appeared to be acting in violation of firm policy.

According to the AWC Letter, in or around February 2010 Eva Weinberg began working with a profession athlete, whom she introduced to the con man, Michael Stern. FINRA states that she “falsely represent[ed]” Mr. Stern as “a wealthy and successful businessman who could help” the customer with his businesses and finances. In reality, FINRA alleges, Stern was a “con man” who worked with Weinberg to gain the athlete’s trust and “access… his financial accounts, ultimately misappropriating millions of dollars after [Weinberg] left the Firm in July 2010.”

FINRA’s findings state that Merrill Lynch’s email correspondence surveillance system flagged multiple of Weinberg’s emails for review, however, several of those flagged emails which showed “potential violations of Merrill Lynch’s policies and procedures were not appropriately escalated” to branch supervisors. According to FINRA, in one instance Weinberg forwarded an email from the athlete to Stern, despite firm policy forbidding representatives from sharing customer information externally without customer authorization; FINRA also states that a potential investment discussed in the email was not offered by the firm and was thus a possible private securities transaction, and that Weinberg “incorrectly identified herself as a ‘Senior Financial Advisor,'” a position for which she did not have the appropriate license. Another flagged email, according to FINRA, included a thread in which Weinberg tried to “terminate” a real estate attorney’s “engagement with [the athlete] and assume control over advising [the athlete] on a real estate investment he was seeking to unwind,” which FINRA states was outside of the services she was allowed to offer Merrill Lynch customers.

According to her BrokerCheck report, Eva Weinberg has previously received a customer complaint alleging misappropriation, forgery, and the misrepresentation and omission of material facts. That complaint settled for $13,000.

FINRA states that if Merrill Lynch had “more vigorously responded to these red flags, it likely could have discovered EW’s association with MS and been in a better position to address the risk EW posed to Customer A and the Firm.” In connection with all of these findings, it censured Merrill Lynch and assessed a fine of $300,000. Merrill Lynch signed the Letter of Acceptance, Waiver and Consent without admitting to or denying the findings.

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