Finra Fines Merrill $300,000 for Missing Red Flags on Crooked Broker
Merrill Lynch has agreed to pay a $300,000 fine to settle a long-running case involving a former broker who briefly worked on a Miami team at the firm specializing in pro athletes, and who later served time for wire fraud.
In a letter of acceptance, waiver and consent dated Thursday, Dec. 14, the Financial Industry Regulatory Authority said Merrill’s failure to follow up on flagged emails and a garnishment order prevented it from discovering the former broker’s association with a well-known con man. Although the pair stole millions of dollars from a pro football player after the broker had left Merrill, Finra accused the firm of failing to reasonably supervise her.
The letter identifies the broker as EW and her con man associate as MS, and says that both pled guilty to various crimes after EW left the firm and received previous terms.
News articles and Merrill sources said the broker was Eva Weinberg, who worked at Merrill for one year in 2009 and 2010 on a team run by her then-husband Michael Bock, and MS as Michael Stern, who had a criminal history and was accused of bribing public officials prior to Weinberg’s employment at Merrill. The athlete, identified in the consent letter as Customer A, is believed to have been Pro Bowl pass rusher Dwight Freeney, who settled his multi-million dollar claims with Merrill and other defendants in 2017, according to the Finra document.
Weinberg’s BrokerCheck record discloses that a customer alleging forgery and other charges settled a $20 million claim for $13 million.
The consent letter said Merrill violated requirements to adequately maintain systems to supervise employees and to keep broker registration records accurate and updated, and spelled out how the case illustrates reasons for the rules.
“[T]he Firm failed to respond reasonably to red flags that EW was engaged in conduct that appeared to violate the Firm’s policies and procedures,” the consent letter says, highlighting among potential violations of firm policy selling-away emails promoting a private securities deals and potential other outside projects, and a $1.7 million default judgment against EW that was ultimately vacated but that Merrill failed to investigate.
“Had the Firm 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,” the consent order said. Finra also said Merrill failed to report the default judgment on the broker’s U4 regulatory filing and to update other regulatory filings after she left the firm when it learned of felony charges brought against her.
The consent order noted that Merrill changed its policies in October 2012 to require its payroll department to report garnishment orders so that outstanding judgments or liens could be recorded on employees’ U4 forms.
The self-regulatory group fined Merrill $175,000 in January 2014 for failing to submit U4 and U5 amendments reflecting two complaints from customers of brokers misappropriating funds, the consent letter noted in a “relevant disciplinary history” section, and levied another $500,000 fine in September 2012 for the firm’s failure to reflect complaints, arbitrations and civil litigations on about 1,200 filings on employees.
Merrill agreed to this week’s censure and $300,000 fine without admitting or denying the consent letter findings, as is typical in Finra settlements.
Howard Heiss, a lawyer at O’Melveny & Myers who represented Merrill in the Finra investigation that began in 2014, referred questions to a Merrill spokesman. The spokesman declined to comment.