Merrill Lynch fined for late U5 filing

The U-5, the Uniform Termination Notice, is an important part of the information flow in the securities industry.  When a Registered Representative leaves a firm, a U-5 must be filed.  The firm has 30 days to do so.  Most firms have procedures in place to timely file a U-5.

Merrill Lynch, I am sure, has such procedures.  But those procedures were apparently missed when it came to a Missouri broker named Greg Campbell.  The firm received two complaints alleging theft from customer accounts.  Firms do not tolerate theft from customer accounts.

But when Mr. Campbell left Merrill Lynch and joined LPL, it took the firm a year to notify FINRA of the complaints.  That led to Campbell’s termination at LPL.  But I am sure that LPL would not have hired him in the first place had they known about the complaints.  And that would have avoided $500,000 of theft, the amount reported by the Wall Street Journal that was stolen from LPL customers.  This is on top of the $1.7 million stolen from Merrill Lynch customers.

I have seen situations like this before.  I’m wondering if LPL will go after Merrill Lynch for its failure to timely report, arguing that had Merrill Lynch reported the two complaints, LPL would not have hired the thief and not paid out $500,000 in restitution.  I guess we’ll see.  But it will be in arbitration, so maybe we won’t see unless a decision is reported.

That’s the view of one lawyer from beautiful Jupiter, Palm Beach County, Florida.  I’m Marc Dobin and I’m looking at blue skies outside my window.

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