SEC Charges Merrill Lynch and Harvest Volatility Management for Ignoring Client Instructions

The Securities and Exchange Commission today announced charges against Harvest Volatility Management LLC and Merrill Lynch, Pierce, Fenner & Smith Inc. for exceeding clients’ designated investment limits over a two-year period beginning in March 2016, which resulted in clients paying higher fees, being subjected to increased market exposure, and incurring investment losses. As part of the separate settlements, Harvest and Merrill have agreed to pay a combined $9.3 million in penalties and disgorgement to resolve the SEC’s claims. According to the SEC's orders, Harvest was the primary investment adviser and portfolio manager for the Collateral Yield Enhancement Strategy (CYES), which traded options in a volatility index with the aim of generating incremental returns.