A Summer of BD Discontent

July 26, 2016

Jordan A. Thomas weighs in on the importance of protecting customer assets

In June 2016, the SEC announced a $415 million settlement with broker-dealer Merrill Lynch for its misuse of customer funds to generate profits for the company and failing to safeguard customer securities from the claims of its creditors, breaching Rule 12(c)3-3, the “Customer Protection Rule.” This enforcement action against Merrill Lynch was precipitated by whistleblowers represented by Labaton Sucharow.

Following this settlement, the SEC is now looking into how cash is managed at a number of broker-dealers. Broker-dealers now have until November 1 to self-report any non-compliance.

Jordan A. Thomas, Chair of Labaton Sucharow’s Whistleblower Practice said, “After the global financial crisis, the importance of protecting customers’ assets from misuse or insolvency cannot be overstated. This case will serve as a cautionary tale for other financial institutions about how quickly little mistakes, breakdowns in judgment and old-fashioned greed can snowball into expensive front-page scandals.”