Merrill Lynch Charged With Gatekeeping Failures in the Unregistered Sales of Securities

The Securities and Exchange Commission today announced settled charges against Merrill Lynch, Pierce, Fenner & Smith Inc. for its failure to perform required gatekeeping functions in the unregistered sales of securities on behalf of a China-based issuer and its affiliates. The SEC’s order found that Merrill Lynch sold almost three million shares of Longtop Financial Technological Limited’s securities into the market despite red flags indicating that the sales could be part of an unlawful unregistered distribution. Ultimately, the distribution generated almost $38 million in proceeds for the overseas issuer and its affiliates. “Broker-dealers are important gatekeepers,” said Antonia Chion, Associate Director of the SEC’s Division of Enforcement.